Schedule C (Form 1040): Profit or Loss From Business (Sole Proprietorship)

You file Schedule C to report income or loss from a business you operated or a profession you practiced as a sole proprietor. If you are the sole member of a domestic LLC and have not elected to treat it as a corporation, you file Schedule C too. Owned more than one business during the year? Fill out a separate Schedule C for each one. Estates and trusts leave the social security number block blank and enter the EIN on line D instead.

• Statutory employees with a checked box 13 on Form W-2 report that income and its expenses here
• If you had both self-employment income and statutory employee income, you file two Schedules C
• Spouses who jointly own and share in an unincorporated business are generally partners and file Form 1065
• Farming profit or loss goes on Schedule F, not Schedule C

Schedule C is not something you file on its own. You attach it to Form 1040, 1040-SR, 1040-SS, 1040-NR, or 1041. It carries attachment sequence number 09. Partnerships generally file Form 1065 instead. Once you figure your net profit or loss on line 31, you carry that number to Schedule 1 (Form 1040), line 3, and to Schedule SE (Form 1040), line 2. Estates and trusts carry it to Form 1041, line 3. Statutory employees and notaries public do not put line 31 on Schedule SE.

Start at the top with your name, your social security number, and the basics about the business: what it does, the six-digit activity code, the business name, your EIN if you have one, the address, and your accounting method. Then work through the parts in order. Part III and Part V both feed numbers back into the front page, so it helps to do those before you finish Part I and Part II.

• Part I: gross receipts, returns and allowances, cost of goods sold, and other business income
• Part II: expenses from advertising through other expenses, with home office only on line 30
• Part III: inventory and cost of goods sold, with the total going to line 4
• Part IV: vehicle information, if you claim car or truck expenses and are not required to file Form 4562
• Part V: other expenses listed by type and amount, with the total going to line 27b

The standard mileage rate for operating your car for business is 70 cents per mile. The energy efficient commercial buildings deduction now sits on line 27a, and other expenses from line 48 now go on line 27b. Certain qualified property acquired and placed in service after January 19, 2025 can take 100% bonus depreciation, or you can elect the previous phase-down rates instead. The maximum section 179 expense deduction is $2.5 million, reduced by the amount your section 179 property placed in service during the year goes over $4 million.

• Domestic research and experimental expenditures: deduct as current business expenses, or elect to capitalize and amortize over 60 months or more
• Qualified sound recording productions: up to $150,000 of costs starting after July 4, 2025 but before January 1, 2026
• Qualified tips: up to $25,000, claimed on Schedule 1-A (Form 1040) and not on Schedule C
• Qualified overtime: up to $12,500, or $25,000 if married filing jointly, also on Schedule 1-A (Form 1040)
• Car loan interest: only the business-use part of the interest goes on Schedule C

Line 30 is the only place these expenses go. Do not report them anywhere else on the form. You have two ways to figure the amount. Attach Form 8829 and bring the figure from its line 36 over, or elect the simplified method and multiply the square footage you used regularly and exclusively for business by $5. The area cannot be more than 300 square feet. If you use the simplified method, fill in the two square footage spaces on line 30 and use the Simplified Method Worksheet in the instructions. You cannot use both methods for the same home.

You are generally treated as partners and have to file Form 1065. Two paths let you avoid that. You can elect qualified joint venture treatment if you each materially participate, you are the only owners, and you file a joint return for the tax year. Then you divide every item of income, gain, loss, deduction, and credit by your respective interests, and each of you files a separate Schedule C. The other path is community property: if you wholly own the business as community property, you can treat it as a sole proprietorship and report it all on one spouse's Schedule C.

• A business owned and operated through an LLC does not qualify for the qualified joint venture election
• You do not need an EIN to make the election, though you may need one to file other returns
• Rental real estate under the election goes on Schedule E (Form 1040), not Schedule C