If you drive for a rideshare company, do freelance work, or run any kind of side business, you are considered self-employed in the eyes of the IRS. That means you file a Schedule C and can deduct ordinary and necessary business expenses from your income before calculating what you owe.
What Counts as a Deductible Expense
The IRS defines a deductible business expense as one that is both ordinary (common in your industry) and necessary (helpful and appropriate for your business). You do not need to use an expense exclusively for work in every case, but you can only deduct the business-use portion.
Common Deductions for 1099 Workers
Mileage and vehicle expenses If you use your car for work, you can deduct either the standard mileage rate (67 cents per mile for 2024) or your actual vehicle expenses. Track every work trip with a date, destination, and business purpose. Apps like MileIQ make this easier.
Home office If you use part of your home regularly and exclusively for business, you can deduct either a simplified rate ($5 per square foot, up to 300 sq ft) or your actual home office expenses. The space must be your principal place of business.
Phone and internet You can deduct the business-use percentage of your phone and internet bill. If you use your phone 60% for work, you deduct 60% of the cost.
Equipment and supplies Laptops, cameras, tools, and software used for your business are deductible. Equipment over a certain cost can often be fully deducted in the year of purchase under Section 179.
Health insurance premiums Self-employed individuals can deduct 100% of health insurance premiums paid for themselves, their spouse, and dependents — even if they do not itemize.
Half of self-employment tax You pay both the employee and employer sides of Social Security and Medicare. The IRS lets you deduct half of your self-employment tax from your gross income.
Retirement contributions Contributions to a SEP-IRA, SIMPLE IRA, or solo 401(k) reduce your taxable income dollar for dollar.
What You Need to Keep
Keep receipts, bank statements, and mileage logs. The IRS requires documentation to support every deduction. A dedicated business bank account and credit card make this much simpler at tax time.
The Bottom Line
Self-employed workers often overpay because they miss deductions they are entitled to. A tax professional can review your expenses and make sure your Schedule C reflects your actual costs. Book a consultation with Financial Ace to go through your 1099 income and find every deduction that applies to your situation.