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Level 1
posted Feb 14, 2020 12:29:38 PM

Paid for Labor and Materials

My husband is a sole proprietor for a painting and drywall business. He works a combination of his own jobs and some for another company that hires him as a sub contractor. When he invoices the other company for his work he lists Labor for "$X" and then Materials for "$X". When they send him his 1099 at the end of the year it includes the total including labor and materials. We can deduct the materials cost, but it seems like we are paying "income tax" on money that is actually simply used to buy materials. For instance, if a job is for $1000 labor cost and then $250 for paint - he will be paid $1250 by the company - and then 1099'd for that amount. When we put the $250 into deductions, it does not reduce our tax owed by that much - or does it? Am I using the wrong deduction? I'm putting it under "Supplies".

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1 Replies
Level 15
Feb 14, 2020 12:39:26 PM

Yes Supplies is the right place.  His schedule C Net Profit should go down.  He pays self employment tax on the Net Profit.  But like for a small deduction it might not change too much.  Only by SE tax percentage which is about 15.3%.  So a $250 Deduction would only reduce the SE tax by about $36.