10 Tax Deductions Every 1099 Contractor Should Know About

One upside of filing with a W-9 instead of a W-4 is that you’re running a small business, even if it doesn’t feel that way. That means ordinary and necessary business expenses come off the top of your income before taxes are calculated. Here are ten deductions freelancers and independent contractors commonly qualify for and often miss.

1. Home office

If you use part of your home regularly and exclusively for work, you may be able to deduct a portion of your rent or mortgage interest, utilities, insurance, and depreciation. The simplified method lets you deduct $5 per square foot of office space, up to 300 square feet, without tracking actual expenses. The key word is exclusively: a desk in the corner of your living room where the family also watches TV generally doesn’t qualify.

2. Vehicle and mileage

If you drive for work, meeting clients, picking up supplies, traveling between job sites, you can deduct either the standard mileage rate for business miles driven, or your actual vehicle expenses (gas, insurance, repairs, depreciation) based on the percentage of driving that was for business. Commuting from home to a regular office doesn’t count, but most other business driving does.

3. Phone and internet

If you use your personal cell phone or home internet for work, you can deduct the business-use percentage of the bill. If half your phone use is business calls and client texts, half the bill is potentially deductible.

4. Software and subscriptions

Invoicing tools, design software, project management platforms, cloud storage, and industry-specific subscriptions used for your work are generally deductible in the year you pay for them.

5. Health insurance premiums

If you’re self-employed and not eligible for a spouse’s employer plan, you may be able to deduct 100% of your health insurance premiums for yourself, your spouse, and dependents. This is an above-the-line deduction, meaning it reduces your taxable income even if you don’t itemize.

6. Retirement contributions

Contributions to a SEP-IRA, Solo 401(k), or SIMPLE IRA reduce your taxable income while building retirement savings. Contribution limits for self-employed retirement accounts are often much higher than a standard IRA, which makes this one of the largest deductions available to high-earning contractors.

7. Business insurance

Premiums for liability insurance, professional errors and omissions coverage, or business property insurance are deductible business expenses, separate from personal health insurance.

8. Professional services

Fees paid to an accountant, bookkeeper, lawyer, or business consultant for work related to your business are deductible, including the cost of preparing your business tax return.

9. Education and training

Courses, certifications, books, and conferences that maintain or improve skills needed for your current work are generally deductible. A course that qualifies you for a brand-new, unrelated line of work typically doesn’t count.

10. Bank and payment processing fees

Monthly business bank account fees, and the percentage that payment processors like PayPal, Stripe, or Square take out of client payments, are both deductible business expenses.

Why these matter beyond your income tax bill

Every dollar of deductible business expense reduces your net self-employment income, which lowers not just your federal income tax but also your self-employment tax (the 15.3% that covers Social Security and Medicare). That’s a bigger combined impact than a deduction of the same size would have for a W-2 employee.

Curious what a specific set of deductions could mean for your bill? Try the deduction savings calculator to see a quick estimate.

Keeping records that hold up

You don’t need elaborate bookkeeping software to claim these deductions, but you do need to be able to show the expense was for business. A simple habit that works for most people: keep a separate business bank card, save digital receipts as they come in, and jot down the business purpose on anything that isn’t obviously work-related.

Before you send that W-9

If a client is requesting your taxpayer information before they’ll pay you, get it done in a few minutes. Fill out your W-9 now with W9 Helper, free, no account, and your SSN or EIN is never saved.

This article is general information, not tax advice. Deduction eligibility depends on your specific facts and circumstances. Talk with a tax professional before making decisions based on this list.