Can Freelancers Claim Expenses if They Only Work W2 Temporarily?

I've been in a bit of a pickle with my taxes lately and hoping someone here can help. For the first few years of my freelance career, I operated exclusively on 1099 invoices for basically every project I did. It was great for tax purposes because I could write off a bunch of expenses like my cell phone bill, home internet, office supplies for my home workspace, equipment I'd bring to client locations, and software subscriptions (Adobe Creative Suite and Microsoft Office). But the industry has shifted majorly in the last couple years. Now almost every contract gig in my field is requiring W2 employment status instead of 1099. I'm still doing the exact same type of freelance work - jumping from project to project with different companies - but now they're all putting me on payroll as a temporary employee rather than letting me invoice as an independent contractor. I'm confused about what expenses I can still deduct. Can I still write off my home office since I use it to find work between gigs? What about my phone and internet that I need to communicate with potential clients? Or the software I pay for yearly that I use across all these temporary W2 positions?

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18 comments

Isabella Santos

•8M

Unfortunately, the tax implications between 1099 and W2 work are pretty different, even if the actual work feels the same to you. When you work as a W2 employee (even temporarily), the IRS views you as an employee rather than a self-employed individual. The big change is that most of those business expenses you used to deduct on Schedule C are no longer available to you as itemized deductions. The Tax Cuts and Jobs Act eliminated miscellaneous itemized deductions for unreimbursed employee expenses for tax years 2018-2025. This means things like your home office, software, and supplies used for W2 employment can't be deducted on your personal return. If you have even a small amount of 1099 income alongside your W2 work, you could allocate a portion of expenses to that self-employment activity. For example, if 20% of your income is from 1099 work, you might be able to deduct 20% of your phone/internet/software as business expenses.

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Isabella Santos

•8M

Yes, if you have some 1099 income alongside your W2 work, you can definitely allocate expenses proportionally to your self-employment activities. So if 20% of your income comes from 1099 work, you could potentially deduct 20% of relevant expenses (phone, internet, software, etc.) on Schedule C for that self-employment portion. Regarding forming an LLC, that doesn't automatically change your tax situation. An LLC with a single owner is typically treated as a "disregarded entity" for tax purposes, meaning the IRS still sees you as a sole proprietor filing Schedule C. The LLC provides liability protection, but doesn't change how your W2 income is treated for tax purposes.

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GalacticGuru

•8M

I was in a really similar situation last year and was pulling my hair out trying to figure out what expenses I could still claim! I was spending hours digging through IRS publications and tax forums until I found this AI tax tool called taxr.ai that helped me sort everything out. What I liked about https://taxr.ai was that I could upload my documents and get clear answers about exactly which expenses I could still deduct with my mixed income situation. It analyzed my specific scenario (part W2, part 1099) and showed me how to properly allocate shared expenses between business and personal use. Saved me from making some mistakes that probably would've triggered an audit!

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GalacticGuru

•8M

It doesn't directly connect to TurboTax, but it gives you detailed guidance that you can easily follow while inputting info into your tax software. I found the recommendations extremely specific and easy to follow. For me, it was actually more helpful than my previous accountant because it explained WHY certain deductions were or weren't allowed. Yes, it absolutely helps with state tax implications! That was actually one of the most valuable features for me. It identified several state-specific deductions I was eligible for that my federal return didn't include. The system seems to have comprehensive knowledge of how each state's tax code differs from the federal rules.

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Omar Fawaz

•8M

Just wanted to update everyone after trying out taxr.ai that the previous commenter mentioned. I was really impressed! I uploaded my 1099s and W2s, and it immediately identified that I could still deduct about 30% of my home office expenses based on the portion of my work that was still 1099. It also showed me that I could deduct some of my software subscriptions by calculating the exact percentage used for 1099 work versus W2 jobs. What was most helpful was that it explained specifically how to document this allocation method in case of an audit. I feel way more confident about my deductions now! Honestly wish I'd known about this tool years ago.

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Chloe Anderson

•8M

Hey there, I went through this exact situation last tax season and couldn't get a straight answer from anyone. I spent WEEKS trying to get through to the IRS to confirm what I could still deduct. Their phone lines were constantly busy and I kept getting disconnected when I finally got through. A colleague recommended this service called Claimyr that got me through to an actual IRS agent in under 30 minutes! You can check it out at https://claimyr.com or see how it works here: https://youtu.be/_kiP6q8DX5c. The IRS agent I spoke with clarified that while I couldn't deduct most expenses for my W2 work, there were special rules for temporary W2 positions in certain industries. Totally worth it to get official confirmation directly from the IRS instead of guessing.

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Chloe Anderson

•8M

It's not a priority line - they use an algorithm that constantly redials the IRS using optimal timing patterns until they get through. Once there's a connection, they immediately transfer you to the call. It's basically doing the redial work for you instead of you having to spend hours hitting redial yourself. I was skeptical too! But the reality is the IRS only answers about 10% of calls during tax season, and I had already wasted hours trying to get through myself. The service just handles the frustrating part of repeatedly calling and navigating the initial menu options. When they get an actual IRS agent, you get transferred directly to that person. You're still talking to the same regular IRS employees everyone else talks to, you just don't have to waste your day trying to get through.

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Anastasia Fedorov

•8M

I need to eat my words here. After my skeptical comment earlier, I decided to try Claimyr this morning because I've literally been trying to reach the IRS for THREE WEEKS about a similar contractor/W2 expense issue. I got connected to an IRS agent in 47 minutes (which honestly felt like a miracle). The agent confirmed that even though I'm mostly W2 now, I can still deduct expenses related to looking for work in my field as self-employment expenses on Schedule C, since finding contract work is effectively its own business activity. She also explained exactly how to document the distinction between expenses for current W2 positions (not deductible) vs. expenses for finding and securing new contracts (potentially deductible). That clarification alone probably saved me over $2000 in legitimate deductions I was going to skip out of fear of an audit!

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StarStrider

•8M

Have you considered asking your W2 employers for expense reimbursement? Many companies will reimburse you for software, equipment, and even home office expenses if you push for it, especially for temporary/contract roles. That way you don't have to worry about tax deductions at all. When I switched from 1099 to W2 work, I negotiated a slightly higher hourly rate to offset the loss of tax deductions, plus got them to cover my Adobe subscription directly. Worth asking!

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StarStrider

•8M

I didn't have to show previous tax returns, but I did prepare a simple spreadsheet showing my effective income before and after deductions when I was 1099 versus the proposed W2 rate. Made it clear I needed either reimbursement for specific expenses or a higher rate to maintain the same effective income. Most employers understand this math once you lay it out clearly. The key is bringing it up during the initial negotiation phase, not after you've already accepted the rate. I've found being direct but professional works best - "My standard rate accounts for business expenses I previously deducted as a 1099 contractor, including software licenses and equipment. How does your company typically handle these expenses for W2 contractors?

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