5 Deductions Most 1099 Workers Miss

If you receive a 1099 — whether you drive for Uber, freelance on the side, sell on Etsy, or run a one-person LLC — you're paying self-employment tax on top of regular income tax. The good news: every legitimate deduction you take reduces both. The bad news: most 1099 workers leave thousands of dollars on the table every year because they don't realize what's deductible.

Here are the five we see missed the most often.

1. The Home Office Deduction

If you have a space in your home used regularly and exclusively for your business — a dedicated room, a corner of a basement, a converted garage — you can deduct a portion of your rent or mortgage interest, utilities, internet, insurance, and depreciation.

Two ways to calculate it:

• Simplified method: $5 per square foot, up to 300 sq ft ($1,500 max).
• Actual expense method: percentage of home used for business × actual home expenses. Usually larger if you track carefully.

2. Mileage (All of It)

For 2025, the IRS standard mileage rate is 70¢ per business mile. That adds up fast — 5,000 business miles is a $3,500 deduction.

Trips most people forget to log:

• Driving to the bank for business deposits
• Office supply runs
• Client meetings, networking events, conferences
• Trips to the post office for business mail
• Driving between job sites (not commuting from home to a single regular workplace)

Use a mileage-tracking app (MileIQ, Stride, QuickBooks Self-Employed) so you have a contemporaneous log. The IRS will not accept a number you reconstructed from memory in April.

3. Health Insurance Premiums

If you're self-employed and pay your own health insurance — including dental and qualifying long-term care — you can deduct 100% of the premiums for yourself, your spouse, and your dependents. This is an above-the-line deduction, meaning you get it even if you don't itemize.

Caveat: you can't take it for any month you were eligible to participate in an employer's plan (yours or your spouse's). And the deduction is limited to your business's net profit.

4. Retirement Contributions (SEP-IRA or Solo 401(k))

This is the single most powerful tax move available to self-employed people, and almost nobody uses it.

• SEP-IRA: contribute up to 25% of net self-employment earnings, capped at $70,000 for 2025.
• Solo 401(k): same employer-side limit, plus $23,500 employee deferral ($31,000 if 50+).

Every dollar you contribute reduces your taxable income now. For someone in the 22% bracket paying 15.3% SE tax, a $10,000 SEP contribution is roughly $3,700 in immediate tax savings — and the money grows tax-deferred.

5. The Qualified Business Income (QBI) Deduction

Most 1099 income qualifies for the 20% QBI deduction. It's not a deduction you have to spend money to earn — it's a calculation on your return that reduces taxable income by up to 20% of your qualified business profit.

Phase-outs kick in at higher income levels and certain 'specified service' trades (consulting, health, law, financial services) have additional limits above the threshold. Worth checking even if you assume you don't qualify.

Putting It Together

Between mileage, home office, health insurance, retirement, and QBI, a typical 1099 worker earning $80,000 in gross self-employment income can legitimately reduce taxable income by $15,000–$25,000. That's $4,000–$7,000 back in your pocket.

The catch is documentation. The IRS doesn't disallow deductions because they don't exist — they disallow them because you can't prove them. Save receipts, log mileage in real time, and keep a separate business bank account so the numbers tell a clean story.