Can you deduct what you pay contractors?
Yes. What you pay freelancers and contractors for the business is deductible in full. From 2026 payments, you send a 1099-NEC to anyone you paid $2,000 or more.
The rule
Payments to people who aren’t your employees, designers, developers, editors, assistants, are contract labor. They come off profit when you pay them.
Ask for a Form W-9 before you pay, so you have their name and tax number. If you paid a person or an LLC $2,000 or more during 2026 by check, bank transfer or cash, file a 1099-NEC and send them a copy by January 31, 2027 (February 1, because the 31st is a Sunday). For payments in 2025 the threshold was $600.
Payments made by credit card or through a platform like PayPal are reported by the processor, so they don’t need a 1099-NEC from you.
A $1,200 logo from a freelance designer is deductible in full.
Priced at 36¢ on the dollar, the rate of a $95,000 sole proprietor in California. Work out yours.
- Where it goes
- Schedule C line 11, contract labor
- What to keep
- Invoices, the W-9 and proof of payment.
Checked on September 25, 2026 against Instructions for Forms 1099-MISC and 1099-NEC and Instructions for Schedule C. An estimate for your records, not tax advice.
By the kind of work
What else each of these can deduct, and what they tend to miss.
See it on every receipt.
Snap it and Reimburse files it on the right Schedule C line, takes the deductible share and shows what it puts back.