What Expenses You Can Deduct When You Receive a 1099

What you can deduct depends on whether the expense is ordinary and necessary for your work

A 1099 deduction is any business expense you subtract from your 1099 income before calculating what you owe in taxes. The IRS allows you to deduct expenses that are both ordinary (common in your line of work) and necessary (helpful to doing that work). You do not deduct them from your gross income on the 1099 itself — the form reports what you earned before expenses. Instead, you list deductions on Schedule C (Form 1040), which is where self-employed people report profit or loss.

The key rule: the expense must be directly tied to earning that 1099 income. A home office desk is deductible if you use it for client work. A desk in your bedroom that you use for personal bills is not. The difference is whether the expense helped you do the work that generated the 1099 payment.

Key Takeaways

• You report 1099 income on Schedule C and subtract ordinary, necessary business expenses to find your taxable profit.
• Common deductible expenses include supplies, equipment under $2,500, vehicle mileage, home office space, and professional services like accounting or software.
• You must keep receipts or records showing what you spent, when, and what it was for — the IRS does not take your word for it.
• Meals, entertainment, and vehicle expenses have stricter rules: meals are 50 percent deductible, and vehicle mileage must be tracked by date and business purpose.
• Personal expenses, commuting, and clothing worn outside work are never deductible, even if you wear them while working.

Supplies, equipment, and tools under $2,500

Office supplies, software subscriptions, tools, and equipment you buy for work are deductible. This includes pens, paper, printer ink, design software, accounting software, a laptop, a camera, or a drill — anything you use to do the work that generates your 1099 income.

If an item costs less than $2,500, you can deduct the full cost in the year you buy it. If it costs $2,500 or more, you typically depreciate it over several years instead of deducting it all at once. For example, a $1,200 camera is fully deductible in the year you buy it. A $5,000 camera is depreciated over five years, meaning you deduct a portion each year.

Keep the receipt or invoice showing what you bought, how much you paid, and the date. If you buy supplies in bulk, the receipt should show the quantity and unit price.

Home office space and utilities

If you use part of your home exclusively for work, you can deduct a portion of rent, mortgage interest, property tax, utilities, internet, and home insurance. The IRS offers two methods: the simplified method (deduct $5 per square foot of dedicated office space, up to 300 square feet) or the regular method (calculate the percentage of your home used for work and deduct that percentage of all home expenses).

The space must be used regularly and exclusively for work. A bedroom you use as an office during the day but sleep in at night does not may have access to. A corner of your kitchen where you answer emails does not may have access to. A separate room or a clearly defined area used only for client work does may have access to.

For the regular method, you need records of your total home expenses for the year: mortgage interest or rent, property tax, utilities, insurance, repairs, and depreciation. You then multiply each by the percentage of square footage your office occupies. For example, if your office is 200 square feet and your home is 2,000 square feet, your office is 10 percent of your home, so you deduct 10 percent of each expense.

Vehicle mileage and transportation

If you drive for work — to meet clients, pick up supplies, travel between job sites — you can deduct the mileage. For 2024, the IRS standard mileage rate is 67 cents per mile for business driving. You multiply your business miles by this rate to find your deduction. You do not deduct the cost of gas, insurance, or maintenance separately when you use the standard mileage method.

You must track your mileage by date, destination, business purpose, and miles driven. A straightforward log in your phone or a notebook works: "Jan 15, drove to client meeting in downtown, 12 miles." At year-end, add up all business miles and multiply by the rate. Commuting to a regular workplace does not count, but driving from your home to a client site does.

If you own a vehicle used partly for work and partly for personal use, you can only deduct the business portion. If you drive 15,000 miles per year and 9,000 are for work, you deduct 60 percent of vehicle expenses.

Professional services and subscriptions

Fees you pay to accountants, lawyers, bookkeepers, consultants, or other professionals who help you run your business are deductible. This includes tax preparation, business formation, contract review, and bookkeeping. Software subscriptions for work — project management tools, design software, accounting software, video conferencing — are also deductible.

Keep invoices from the professional or subscription receipts showing the service provided and the cost. If a professional provides both personal and business services (for example, a lawyer who handles your divorce and your business contract), ask them to itemize the bill so you deduct only the business portion.

Meals and entertainment with limits

Meals you buy while working — lunch during a client meeting, coffee while working on a project at a café — are 50 percent deductible. You can deduct half the cost. Entertainment expenses (tickets to a show, golf outing, or sports event) are also 50 percent deductible if they are directly related to your business or meant to build a business relationship.

You must document what the meal or event was, when it occurred, who attended, and the business purpose. "Client lunch" is not enough. "Lunch with Sarah Chen, potential client for web design project, discussed project scope" is what the IRS wants to see. Keep the receipt showing the date, vendor, and amount.

Meals you eat alone while working are deductible at 50 percent. Meals you eat at home are not deductible, even if you eat at your desk while working. The distinction is that you would eat anyway — the deduction is only for the incremental cost of eating out for business.

What you cannot deduct

Personal expenses are never deductible, even if you incur them while working. Clothing worn outside work — a suit, shoes, or jeans — is not deductible, even if you wear it to client meetings. Clothing is only deductible if it is specialized work gear you cannot wear elsewhere: a chef's uniform, a nurse's scrubs, or a construction hard hat.

Commuting to a regular workplace is not deductible. If you have an office you rent and you drive there each day, that mileage does not count. Driving from home to a client site counts. Driving from your home office to a client site counts. Driving from your regular office to a client site counts. But the daily trip to your main workplace does not.

Fines, penalties, and illegal expenses are not deductible. Parking tickets, speeding tickets, and tax penalties cannot be written off. Personal entertainment — a movie ticket you buy for yourself, a vacation — is not deductible unless it is a business conference or trade show where you are learning skills relevant to your work.

Record-keeping requirements

The IRS does not require you to send receipts with your tax return, but you must keep them for at least three years in case of an audit. For each expense, you need to show: what you bought, how much you paid, when you bought it, and how it relates to your business.

For large purchases or categories, a credit card statement alone may not be enough. If your statement says "Office Depot $127.43," you should also have the receipt showing what items you bought. For mileage, a log or app is required — a credit card statement for gas does not prove business mileage.

Digital records work as well as paper. Photos of receipts, spreadsheets, accounting software, or mileage apps are all acceptable. Many self-employed people use apps like Stride Health, Quickbooks Self-Employed, or Wave to track expenses and mileage automatically.

Frequently Asked Questions

Can I deduct my internet bill if I work from home?

Only the business portion. If you use your internet for work and personal use, you can deduct the percentage used for work. If your bill is $60 per month and you estimate 50 percent is for work, you deduct $30 per month. The simplified home office method ($5 per square foot) includes utilities, so if you use that method, do not also deduct internet separately.

Are health insurance premiums deductible on a 1099?

Yes, but not on Schedule C. Self-employed health insurance premiums are deducted on Form 1040 itself, above the line, which means they reduce your income before calculating self-employment tax. This is more valuable than a Schedule C deduction. You must be self-employed and cannot be covered by an employer plan to claim this.

Can I deduct my phone bill?

Only the business portion. If you use a phone for both personal and business calls, you can deduct the percentage used for work. If you have a separate business phone line, the full cost is deductible. Keep records showing how you calculated the business percentage.

What if I buy something I use partly for work and partly personally?

Deduct only the business portion. If you buy a laptop for $1,200 and use it 70 percent for work and 30 percent for personal use, you deduct $840. You must be able to document or reasonably estimate the business percentage. For vehicles, track business and personal miles separately.

Do I need to deduct every small expense?

No. You can deduct small expenses, but it is not required. Many people skip expenses under $25 because the record-keeping effort is not worth the tax savings. However, if you have many small expenses, adding them up can be significant. Use your judgment based on how much time tracking them takes versus the deduction value.