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What Are the Different Types of 1099 Deductions?

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  • Written By: Jessica Ellis
  • Edited By: Bronwyn Harris
  • Last Modified Date: 07 November 2014
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A 1099 is a type of income tax form used in the US for unincorporated businesses and individuals who are self-employed. Taking deductions from a 1099 can help reduce tax burdens and even sometimes lead to a tax return. There are several different types of 1099 deductions, including business expenses, home office expenses, and costs for transportation. It is important to exercise caution when claiming 1099 deductions, as the Internal Revenue Service (IRS) may request receipts and documentation of any deductions taken.

Business expenses may include any item or equipment purchase that relates directly to the income generated by the business. For instance, if a small business buys new computers for the office, the owner may be able to deduct this as a business expense. Office supplies, tools or safety equipment, or other expenses that relate to the place or function of business can usually be deducted. In case of an audit, it may be a good idea to deduct only items that have a record or receipt, and can be shown to be for business use.

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Many contractors and self-employed professionals operate out of their homes, which may qualify them for certain home office 1099 deductions. One important deduction may come from rent paid for the space used as a dedicated office. In order to determine this amount, divide the total square footage of the house by the monthly rent to come up with a price-per-square foot figure. Then, measure the square footage of the home used solely for business, and multiply it by the price-per-square-foot. This will give the total amount per month spent on rent for business purposes, which can then be multiplied by 12 to get a yearly deduction amount.

In addition to rent, home expense 1099 deductions work similarly to business deductions, in that supplies, utilities, and equipment used solely for business use can usually be fairly deducted. This can get somewhat complicated, since some items, such as Internet or phone lines, may be used for both personal and business reasons. Some experts recommend deducting a portion of utility bills and service costs, but others suggest speaking to a tax professional to get an accurate idea of what can be legally deducted.

For people who must travel for business, transportation 1099 deductions can sometimes come into play. Taking these deductions usually legally requires a taxpayer to keep an accurate record of mileage, gas, and travel expenses used for business. Some people keep a logbook in their car that can be updated every time a business-related drive is made. Keeping receipts for business-related hotel stays, airline tickets, and even public transportation records can also help create an accurate deduction figure.

The IRS maintains very strict regulations on 1099 deductions. Before deducting an expense, it may be a good idea to read the rules regarding each type of deduction. These rules are updated regularly, and are usually available through the IRS website or in tax booklets. Following deduction laws carefully can help prevent an audit or at least prepare the taxpayer to properly defend him or herself should an audit occur.

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anon243308
Post 1

I received a 1099 for bonuses received during last year. I took all my information to my tax preparer and they said that the account put the amount in box 7. From the explanation they gave me when entered, it comes up as I am an owner declaring a loss. They stated the accountant has it wrong and the amount should be in box 3 for other income. They also showed me if it is in box 7 I will owe, but if it is in box 3, I will get a refund. Can you provide a clarification on this for me to better understand it?

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