What is Schedule C?
Schedule C explained in plain English. Learn what IRS Schedule C is, how freelancers use it to report income, what expenses to deduct, and how to file it correctly with your Form 1040.
What Is Schedule C?
Schedule C (Form 1040) — Profit or Loss from Business — is an IRS tax form used by sole proprietors and single-member LLC owners to report income and expenses from their business. It's attached to your personal Form 1040 and is where the IRS gets the official picture of your freelance or self-employment income. The Schedule C calculates your "net profit" (or net loss) by subtracting your total business expenses from your total business revenue. That net profit figure is then used to calculate your self-employment tax and your income tax liability. If you operated more than one sole proprietorship or self-employment activity, you may need to file more than one Schedule C — one for each distinct business activity.
How to Fill Out Schedule C: Line by Line
Part I: Income - Line 1: Gross receipts or sales (all income you received, including amounts reported on 1099-NECs and cash payments) - Line 2: Returns and allowances (rarely used) - Line 3: Net revenue (Line 1 minus Line 2) - Line 4: Cost of goods sold (if applicable — for product-based businesses, not freelancers) - Line 5: Gross profit (Line 3 minus Line 4) - Line 6: Other income (rare — things like scrap sales) - Line 7: Gross profit (add Line 5 and Line 6) Part II: Expenses This is where you deduct your business expenses. Common lines for freelancers: | Line | Expense Category | Example Deductions | |---|---|---| | 8 | Advertising | Website ads, business cards, LinkedIn ads | | 9 | Car and truck expenses | Mileage (67¢/mile in 2024) or actual expenses | | 11 | Commissions & fees | Platform fees (Upwork 10%), payment processing fees | | 12 | Contract labor | Subcontractors you paid (must issue 1099-NEC if $600+) | | 15 | Depreciation | Equipment, computers, software amortization | | 17 | Employee benefit programs | Health insurance for employees | | 18 | Insurance (other than health) | Professional liability, general liability, E&O insurance | | 20a | Interest (business loans, credit cards) | Business loan interest | | 21 | Legal and professional services | Accountant, bookkeeper, lawyer | | 22 | Office expenses | Printer ink, paper, postage | | 23a | Pension and profit-sharing plans | SEP-IRA, Solo 401(k) contributions | | 25a | Rent (vehicles, equipment, etc.) | Leased equipment, co-working space | | 27 | Repairs and maintenance | Computer repairs, equipment servicing | | 29 | Supplies | Software subscriptions, office supplies | | 30a | Taxes and licenses | Business licenses, real property taxes, state taxes | | 31 | Travel | Client meetings, conferences (transportation + lodging) | | 32a | Utilities | Business percentage of phone, internet, electric | | 33b | Meals (50% only) | Client dinners, business lunches | | 37 | Wages | Employees you pay | Line 48: Total expenses — the sum of all expense lines Line 49: Net profit (Line 7 minus Line 48) — this is your taxable income from self-employment
Example: Schedule C for a Freelance Consultant
Alex is a freelance business consultant. Here's her Schedule C summary: Revenue: - Client invoices paid: $95,000 - 1099 income from two major clients: $70,000 + $25,000 - Gross revenue: $95,000 Expenses: - Advertising (LinkedIn ads): $1,800 - Software subscriptions (Zoom, Notion, Slack): $1,200 - Professional liability insurance: $2,400 - Co-working space: $4,800 - Business travel: $2,100 - Client meals (50%): $600 - Professional development (courses): $1,500 - Accounting software: $540 - Health insurance (self-employed deduction): $4,800 - Total expenses: $19,740 Net Profit: $75,260 This $75,260 is Alex's taxable self-employment income. She'll pay ~$11,525 in self-employment tax (15.3% × 92.35% × $75,260) plus income tax at her bracket rate.
Schedule C and the Home Office Deduction
If you work from a dedicated home office, you can deduct a portion of your housing costs. The IRS offers two methods: Simplified method: - $5 per square foot, up to 300 sq ft = maximum $1,500 deduction - Easier, no depreciation calculations Regular method: - Calculate actual expenses (mortgage interest, utilities, insurance, repairs) - Multiply by the percentage of your home used for business - More complex but potentially larger deduction Either method is entered on Schedule C, Line 30.
Common Schedule C Mistakes to Avoid
1. Claiming personal expenses as business — keep separate business and personal accounts 2. Missing expense categories — use all applicable lines; don't lump everything into "other" 3. Forgetting the home office deduction — if you have a dedicated workspace, claim it 4. Not keeping receipts — maintain records for 3–6 years in case of audit 5. Overlooking the self-employment tax deduction — you can deduct half of SE tax on Line 27 of Form 1040, which reduces taxable income 6. Incorrectly classifying workers — if you have subcontractors, make sure they're truly independent contractors (not misclassified employees) Don't let tax time catch you off guard. Track your income and expenses year-round with Eonebill — all your freelance income flows directly into your Schedule C preparation, making tax season straightforward, not stressful. Want to maximize your deductions? Learn about tax deductions and tax credits that can reduce your overall tax bill. View Pricing → | Glossary Home → | Home →