I make $12k/year as an independent contractor, and I file a 1099. (I'm asking because I am considering purchasing a phone for business use.)
2007-05-29 06:46:47 · 6 answers · asked by elessar221 1 in Business & Finance ➔ Taxes ➔ United States
No.
Taxes owed are based on NET INCOME (Your $12K - Your Business Expenses & other deductions (see the Instructions for the 1040 C -Income from Self employment).
Deducting Business Expenses reduces Your NET INCOME, which can change your TAX BRACKET though, so ALWAYS deduct whatever you safely & legally can.
2007-05-29 06:54:18 · answer #1 · answered by Capt Crasher 6 · 1⤊ 0⤋
Deductions for business expenses reduce your taxable income on a dollar for dollar basis, but not your taxes. As an independent contractor making 12k per year your tax savings for every dollar you spend on deductible expenses would be the sum of three taxes: self-employment tax (roughly 15%), your marginal federal income tax rate, and your marginal state income tax rate. (Theoretically, you may also live in a city or county that has a local income tax as well adding a 4th rate that you would add in).
Your marginal tax rate for both federal and state taxes means the % of tax you are paying on each additional dollar earned. On the federal side, this can vary from approx. 15% - 35% and on the state side from approx. 0% - 13%, depending on income level and state of residence.
2007-05-29 06:59:54 · answer #2 · answered by rayitoco 1 · 1⤊ 0⤋
No. Your business deductions reduce the amount of taxable income you report, and are only worth the value of the % tax bracket into which you fall. If your income is as low as $12K, that percentage will be quite low. The only way to get a dollar for dollar return is to find a tax CREDIT program for certain expenses, and these are not in at all common.
2007-05-29 06:52:00 · answer #3 · answered by acermill 7 · 2⤊ 1⤋
As an independent contractor who gets a 1099 you should be filing a Sch. C when you do your taxes. Anything you buy for your business (like a phone) will be deducted from your income on the Sch. C, which will be before you calculate your taxes.
2007-05-29 06:52:42 · answer #4 · answered by angela 6 · 1⤊ 1⤋
No, It only reduces the tax paid on a dollar earned.
Example: $100 spent on cell phone= $15 saved on taxes.
Assuming you fit in a 15% tax bracket.
2007-05-29 06:57:16 · answer #5 · answered by Anonymous · 2⤊ 0⤋
No, deductions reduce your income dollar for dollar, not your taxes. Taxes, both income and self-employment, are figured as a percentage of net (after deductions) income.
2007-05-29 10:34:10 · answer #6 · answered by Judy 7 · 1⤊ 0⤋
it means that if you spent 10 dollars for that hammer out of your pocket then you can write it off, so when you get your 1099 you can deduct that 10 dollars off your income
2007-05-29 06:52:27 · answer #7 · answered by mrmom 1 · 2⤊ 1⤋