Hi! I've been a 1099 girl for 10 years. Sole proprietor and head of household, but I'm not LLC'ed. This year part of my income will come through a W-2 (so I'll have both a set of 1099s and one W-2). I'm wondering what this means for my business expenses AND my home office deductions. I pay my office expenses for all my jobs (printer ink, computer, etc.). And I work 100 percent in my home office. What happens when my expenses (business and home office) essentially straddle BOTH my 1099 clients and my W-2 client? Thanks!
You have to keep records separating expenses incurred in producing your Form 1099 income and unreimbursed employment expenses related to your W2 income.
Unreimbursed employment expenses related to your W2 income are reported on Form 2106, and in a separate section in TurboTax. Under the current tax law, unreimbursed employment expenses are not deductible for Federal taxes for most people, but I would still encourage you to enter them in TurboTax as they may help you with state income taxes.
You can deduct qualifying business expenses in respect of your 1099 income on Schedule C. You report the expenses in the Self-employment part in TurboTax, and the software will create the Schedule C in the background.
For the home office, you can split the expense between the W2 work and the Schedule C business:
What about my new computer? I use if for both by W-2 client and my 1099 clients. Can I deduct it?
What about my home office? Can I deduct home office expenses that cover ALL the work I do in my home office, regardless of which means by clients use to pay me?
Your home office expenses will be allocated between the two home office deductions. The portion of the costs related to the Form 1099 income will be deductible, while the portion related to the W2 income will not be deductible.
When you report your computer as an asset, you will be prompted to enter the percentage of business use, related to the 1099 income - you will be able to write off a portion of the computer in line with the percentage of business use.