Schedule C
The IRS form (Schedule C of Form 1040) used by sole proprietors and single-member LLCs to report business income and expenses. The net profit flows to your personal tax return.
Schedule C, officially titled "Profit or Loss from Business (Sole Proprietorship)," is the tax form where sole proprietors and single-member LLC owners report their business revenue and deductible expenses. The resulting net profit (or loss) is transferred to your Form 1040 and is subject to income tax and self-employment tax.
The form has five parts covering gross income, expenses (such as advertising, insurance, office expenses, supplies, travel, and vehicle costs), cost of goods sold, vehicle information, and other expenses. Common deductible expenses include business supplies, software subscriptions, professional services, business insurance, and the business use percentage of your home.
If you have more than one sole proprietorship, you file a separate Schedule C for each business. The total net profit from all Schedule C businesses is also used to calculate self-employment tax on Schedule SE. Accurate bookkeeping throughout the year is essential to maximize deductions and minimize audit risk.
Related Terms
Sole Proprietor
An individual who owns and operates an unincorporated business by themselves. Business income and expenses are reported on Schedule C of the personal tax return.
Self-Employment Tax
The combined Social Security (12.4%) and Medicare (2.9%) tax paid by self-employed individuals — effectively both the employee and employer shares of FICA, totaling 15.3%.
Business Expenses
Costs incurred in running a business that are deductible on your tax return if they are ordinary (common in your industry) and necessary (helpful and appropriate for your trade).
Home Office Deduction
A deduction for the business use of your home, available to self-employed individuals. You can use the simplified method ($5 per square foot, up to 300 sq ft) or the regular method based on actual expenses.