08/31/2026
If you're self-employed or earning 1099 income, the tax code actually works in your favor. If you know how to use it.
Unlike W-2 employees, you're taxed on your net income, not your gross. That means every legitimate business expense reduces what you owe before you ever get to the standard deduction.
Key Deductions Every 1099 Worker Should Know 🤔
• Self-employment tax: You pay 15.3%, but you can deduct 50% of that directly from your taxable income.
• Mileage: The standard mileage rate for 2026 is 72.5 cents per mile, up from 70 cents in 2025. Track every business mile.
• Home office: If you use a dedicated space exclusively for work, a portion of your rent, mortgage, and utilities may be deductible.
• Health insurance premiums: Self-employed individuals can deduct 100% of health insurance premiums for themselves and their families.
• Retirement contributions: Contributing to a SEP-IRA, Solo 401(k), or SIMPLE IRA reduces your taxable income.
• Software, subscriptions, and equipment: Business tools, professional services, and technology used for work are generally deductible.
The QBI Deduction is Now Permanent 📋
First and foremost, understand this is in industry specific. Understand if your industry is affected by the QBI deduction.
This is the biggest news for self-employed workers. The One Big Beautiful Bill Act, signed into law on July 4, 2025, made the 20% Qualified Business Income deduction permanent, previously set to expire after 2025
If you're a freelancer, independent contractor, or sole proprietor, you may be able to deduct 20% of your qualified business income. The phase-in thresholds were also raised to $75,000 for single filers and $150,000 for married couples filing jointly.
What’s New? 🆕
The One Big Beautiful Bill Act also created new deductions for tip income, up to $12,500 for those in service industries where tips are customary, and up to $12,500 for overtime pay for eligible contractors. Not every 1099 worker qualifies, but for those who do, it's worth claiming.
Don't Forget the 1099 Reporting Threshold Change 📝
The reporting threshold for 1099-NEC forms has been updated to $2,000. If you hire subcontractors, make sure your bookkeeping reflects the new requirement.
The Bottom Line 🫵
Being self-employed comes with real tax complexity, but also real opportunity. The key is knowing what's available, tracking everything throughout the year, and coordinating your business deductions with your broader financial plan.
The SKG Team works alongside our clients' tax professionals to make sure nothing gets missed. If you're self-employed and want to make sure your financial plan reflects your full tax picture, drop a comment or send us a message.
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