If you earned money as a freelancer, independent contractor, gig worker, or sole proprietor, Schedule C is the form you use to report the income and expenses of that business.

This guide follows the 2025 Schedule C, the version used for 2025 federal income tax returns filed during the 2026 filing season. If you are filing a different tax year, use the IRS form and instructions for that year because lines and limits can change.

Who Uses Schedule C?

Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship) commonly applies when you operate a business as:

  • A sole proprietor
  • A freelancer or independent contractor
  • A gig worker
  • The owner of a single-member LLC treated as a disregarded entity for federal income tax purposes

If your total net earnings from self-employment from all businesses are $400 or more, you generally also use Schedule SE to calculate self-employment tax.

Before You Start

Gather:

  • Your sales records and Forms 1099
  • Categorized business expenses with supporting records
  • Inventory records if you sell or produce merchandise
  • Vehicle records if you claim car or truck expenses
  • Home office records if you qualify for that deduction
  • Asset purchase details for equipment or property that may need to be depreciated

Do not rely on Forms 1099 alone. Your own records should capture income that did not generate a form and help you avoid counting the same receipt twice.

Header: Identify Your Business

At the top of Schedule C, enter the requested information for the business. Key fields include:

  • Name of proprietor and Social Security number
  • Line A — Principal business or profession: a short description of what you do
  • Line B — Business code: the six-digit code that best matches your principal business activity
  • Line C — Business name: if it is different from your own name
  • Line D — Employer identification number (EIN): if applicable
  • Line F — Accounting method: cash, accrual, or another permitted method
  • Line G — Material participation: answer based on your facts

Many small sole proprietors use the cash method, but choose the method that applies to your business.

Part I: Income

Part I calculates your gross income:

  • Line 1 — Gross receipts or sales: report your business receipts or sales, including amounts not reported on a Form 1099.
  • Line 2 — Returns and allowances: enter customer refunds and similar adjustments when applicable.
  • Line 4 — Cost of goods sold: bring this total over from Part III if your business has cost of goods sold.
  • Line 6 — Other income: report business income that does not belong on the earlier lines.
  • Line 7 — Gross income: follow the form calculation.

Reconcile Forms 1099 to your records before entering Line 1. A Form 1099-K can overlap with a Form 1099-NEC or include nonbusiness payments.

Part II: Expenses

Part II lists deductible business expenses. The general rule is that an expense must be ordinary and necessary for your trade or business.

Common lines include:

  • Line 8 — Advertising
  • Line 9 — Car and truck expenses
  • Line 11 — Contract labor
  • Line 13 — Depreciation and section 179 expense deduction
  • Line 17 — Legal and professional services
  • Line 18 — Office expense
  • Line 22 — Supplies
  • Line 24b — Deductible meals
  • Line 25 — Utilities
  • Line 27b — Other expenses

For the current form, Line 27a is reserved for the energy efficient commercial buildings deduction. Itemized other expenses from Part V flow to Line 27b.

Our companion article, Schedule C Expense Categories: The Complete List, explains each line.

When Part II is complete:

  • Line 28 — Total expenses: add Lines 8 through 27b.
  • Line 29 — Tentative profit or loss: subtract Line 28 from Line 7.
  • Line 30 — Expenses for business use of your home: enter the allowable deduction if you qualify.
  • Line 31 — Net profit or loss: follow the form calculation.

Part III: Cost of Goods Sold

Complete Part III if your business buys or produces merchandise and has cost of goods sold. This section can include:

  • Beginning and ending inventory
  • Purchases
  • Cost of labor
  • Materials and supplies
  • Other costs

The result flows to Line 4 in Part I. Many service businesses do not need Part III.

Part IV: Information on Your Vehicle

If you claim car or truck expenses, review Part IV and the Schedule C instructions. The form asks for information such as:

  • The date the vehicle was placed in service for business
  • Business miles
  • Commuting miles
  • Other personal miles
  • Whether you have evidence supporting the deduction

Some filers provide vehicle information on Form 4562 instead. Maintain a contemporaneous mileage log and keep the records needed for the method you claim.

Part V: Other Expenses

Part V itemizes ordinary and necessary business expenses that do not fit a named category in Part II. Enter the total on Line 48, then carry it to Line 27b.

Examples can include bank fees, payment-processing fees, and business dues. Classify expenses consistently and use a named line when one clearly applies.

After Schedule C

If Line 31 is a net profit:

  1. Report the amount on Schedule 1 (Form 1040), Line 3.
  2. Use Schedule SE when required to calculate self-employment tax.
  3. Review whether estimated tax payments apply to your situation.

Individuals, including sole proprietors, generally need estimated tax payments if they expect to owe $1,000 or more when filing. The IRS also applies withholding, credit, prior-year tax, and special-rule tests, so use Form 1040-ES or IRS guidance rather than guessing.

Common Mistakes

  • Reporting only the income shown on Forms 1099
  • Counting the same payment twice when forms overlap
  • Mixing personal and business spending
  • Claiming the personal share of mixed-use phone, internet, or vehicle costs
  • Putting current-form other expenses on Line 27a instead of Line 27b
  • Keeping weak records for vehicle, travel, meal, and home office deductions

Make Filing Easier Next Year

Schedule C is much easier when your transactions are categorized throughout the year. Simple-C helps organize your books into Schedule C categories so you can review your totals and prepare a tax-ready breakdown.

This article provides general information, not tax advice. It discusses the 2025 Schedule C used for returns filed during the 2026 filing season. Check the IRS form and instructions for the tax year you are filing.

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