I have a full time job and file my taxes with my w2. I rent so it’s best for me to claim the standard deduction. Now I have a Etsy business and a 1099. Can I write off my business expenses and still claim my standard deduction?
Can I write off my business expenses and still claim my standard deduction? - Yes you can. Your business expenses and your business income is reported on a Schedule C.
You receive the Standard Deduction for your filing status if the total of your personal itemized deductions are less than standard deduction.
They are totally separate.
You report your business income and expenses on schedule C and calculate your net income. That flows to schedule SE and you will pay 15% self-employment tax on the business profit (the equivalent of social security and medicare withholding from an employer).
Your net business income also flows to your main form 1040 where it is combined with all your other income (wages, investments, gambling, etc.). Then you subtract either the standard deduction or itemized deductions, depending on your situation. You calculate your taxable income and your income tax, and then apply any tax credits (dependents, electric vehicles, energy efficient home improvements, etc.) to find your total income tax.
As the last step, your income tax and self-employment tax are combined. Then you compare your tax to your payments and withholding, and you either get a refund or owe an additional payment.
Don't confuse itemized deductions on schedule A with your business expenses/deductions on schedule C. They are separate. For Schedule A personal deductions, you get to take your itemized deductions or the standard deduction, whichever is larger. Itemized deductions are things like Medical, Gifts to Charity, State Income Taxes Paid, Mortgage Interest, Property Taxes, Car Registration fees, etc.
You get to take both, your business expenses AND the Standard Deduction (or your personal Itemized Deductions). And you have to enter your business expenses. Be aware, if you have self employment income you can get in trouble for not reporting all your expenses to qualify for the EIC.
Some general info on self employment on Schedule C.......
You will need to keep good records. You may get a 1099NEC at the end of the year if someone pays you more than $600 but you need to report all your income no matter how small. You might want to use Quicken or QuickBooks to keep track of your income and expenses.
There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Online Self Employed return....
When you are self employed you are in business for yourself and the person or company that pays you is your customer or client.
To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax. You will need to use the Online Self Employed version or any Desktop program but the Desktop Home & Business version will have the most help.
Here is some IRS reading material……
IRS information on Self Employment
Pulication 334, Tax Guide for Small Business
Publication 535 Business Expenses
You pay Self Employment tax on $400 or more of net profit from self-employment in addition to any regular income tax. You pay 15.3% SE tax on 92.35% of your Net Profit greater than $400. The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare. So you get social security credit for it when you retire.