Receiving a 1099-K means that income has been reported to the IRS. But does it also mean taxes are owed? Not necessarily. Business-related expenses can be written off and in parallel, the amount of taxable income can be reduced.
Self-employed professionals and gig workers as well as freelancers who are obliged to report business income on Schedule C can claim deductions. If payments were received through third-party platforms such as PayPal, Venmo, or Stripe, the reported amount may not reflect actual profit. Deducting ordinary and necessary business expenses results in lower taxation bill.
1099-K tax deductions apply to costs directly related to business operations. In this context, generic deductions are outlined below:
If a dedicated space is used exclusively for business, either the simplified or actual expense method can be applied.
A dedicated portion of the monthly bill can be deducted if used for business.
Either the IRS standard mileage rate or actual expenses (gas, maintenance, depreciation) can be claimed.
Website hosting and domain registration alongside paid promotions.
Fees paid to accountants and tax preparers as well as business consultants.
As of 2025, third-party platforms must report transactions exceeding $2,500—down from $5,000 in 2024. In 2026, the threshold is expected to drop to $600. More individuals will receive a 1099-K which increases tax reporting obligations in general.
If a 1099-K is received, business expenses can be deducted for optimizing the taxes owed. The IRS allows deductions for necessary costs associated with earning income. Track expenses properly, save the receipts, and look for professional advice if necessary in order to establish full compliance.
For expert guidance on 1099-K tax deductions, Watter CPA provides expert support.
