What deductions can 1099 contractors take in 2026?

Schedule C business expenses (reduce both income tax and SE tax). Home office: a dedicated business-use space, deducted as a percentage of actual home expenses (rent, mortgage interest, utilities, insurance, depreciation) based on square footage, or via the simplified $5-per-square-foot method capped at 300 square feet ($1,500 maximum). Vehicle: the standard mileage rate of 67 cents per mile in 2026, or actual expenses (gas, insurance, maintenance, depreciation) prorated to business use. Software and subscriptions: SaaS tools, cloud storage, professional platforms used for the business. Professional development: courses, books, conferences, certifications relevant to your work. Professional fees: lawyers, accountants, consultants paid in connection with the business.

More Schedule C categories. Office supplies and small equipment under $2,500 (expensed in year one); equipment above that threshold (depreciated, with optional Section 179 expensing). Advertising and marketing. Meals at 50% deductibility, with date and business purpose documented. Travel for business (lodging, transportation, 50% of meals). Phone and internet at the business-use percentage. Subcontractor payments over $600 (issue 1099-NEC by January 31).

Above-the-line deductions on Schedule 1 (reduce income tax only, not SE tax). Half of self-employment tax: automatic, no documentation required, applied to Schedule SE output. Self-employed health insurance: full premium for the contractor, spouse, and dependents, deductible above the line if the policy is in the business owner's name (or the business is structured to support it). Retirement contributions: SEP-IRA up to 25% of net self-employment earnings (capped at $70,000 in 2026), solo 401(k) up to $70,000 employer plus $23,500 employee (or $31,000 employee if age 50-plus), traditional or Roth IRA up to $7,000 ($8,000 if 50-plus).

What does not deduct. Personal expenses, even if charged to a business credit card. Commuting between home and a primary work location (different from home office travel, which is deductible). Country club dues and entertainment expenses (eliminated by TCJA in 2017, still gone in 2026). Clothing not specifically required as a uniform or safety equipment. Self-imposed costs: meals while working alone (at 50% only if traveling away from your tax home), personal grooming, gym memberships.

The 20% QBI deduction. Section 199A allows pass-through owners (sole proprietors, S-corp owners, partners) to deduct 20% of qualified business income. The 2026 phase-out begins at $191,950 single / $383,900 MFJ for taxable income, with full phase-out at $241,950 / $483,900 for specified service trades and businesses (consulting, law, accounting, health). Below the phase-out, the deduction applies cleanly. Above the phase-out, complex W-2 wage and unadjusted basis tests apply. For most consultants under $200K of taxable income, this is roughly $5,000 to $7,000 in additional federal tax savings annually.

What changes year over year. Mileage rates are reset annually by the IRS (typically published in late December for the next year). Standard deduction and bracket thresholds are inflation-adjusted. SS wage base is announced by SSA each October. QBI thresholds increase with inflation. Retirement contribution limits are reset annually by IRS. The structural categories of deductions remain stable; the dollar amounts move.