We get this question a lot from part-time 1099 contractors / freelancers. Ever since the Trump administration doubled the standard deduction to $12,000, folks have assumed that this means itemizing 1099 work expenses no longer makes as much sense. Is it true?
The standard deduction is a tax write off that every American gets, just for being a resident. In 2018, it was $12,000 (for single people). What this means is you’ll only get taxed on income greater than the standard deduction amount.
There are two types of itemized deductions - personal and business.
The standard deduction trades off with personal itemized deductions. That means if you have less than $12,000 in itemized personal deductions (very likely), then you shouldn’t bother tracking those because it’ll be better to claim the standard deduction anyway.
Tax deductions related to your 1099 work, however, are completely independent. They are claimed on top of your standard deduction.
Let’s say you earn $50,000, but only $5,000 of that is from a bit of 1099 work you do on the side (ex: driving uber on weekends, or renting a room out on Airbnb).
In this case, you’ll still owe around $1,500 in taxes on your 1099 income (assuming the standard 30% effective tax rate for 1099 income). That’s not nothing!
By remembering to track expenses related to your 1099 work will still save you a ton of money.
Even something small, like parking fees for $10 per week, could be over $200 back in your pocket at the end of the year.
We use computer algorithms to monitor your purchases for tax write offs most people miss... like phone bills, insurance charges, home office expenses, gas fill ups, and so on. It's $10 per month.
Note: at Keeper, we care about helping you save on taxes. That leads us to generalize tax advice which ultimately cannot be completely generalized. Everyone's situation is different. Please drop a note above or reach out via email if you have questions.