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.
How it works
Schedule C is the form where a sole proprietor or single-member LLC translates business activity into a single net profit or loss figure. It works through five parts — gross income first, then expenses broken into IRS-defined categories like advertising, insurance, supplies, and travel, followed by cost of goods sold, vehicle information, and any other expenses that do not fit the standard categories.
You attach Schedule C to your Form 1040, and its bottom-line net profit lands on Schedule 1 as income, then feeds into Schedule SE to calculate self-employment tax. If you run more than one business as a sole proprietor, each one gets its own separate Schedule C — you cannot combine unrelated activities on one form. The categories on the form double as a checklist for what expense records you should be keeping through the year.
A net loss on Schedule C can offset other income on your return, but repeated years of losses can draw IRS scrutiny under the hobby-loss rules, which require a profit motive rather than just a pattern of deductions. People sometimes assume Schedule C is only for full-time businesses, but any side income from freelancing, consulting, or selling goods regularly — even a modest amount — belongs here rather than as miscellaneous income. Accurate expense categorization matters because the categories affect how numbers roll up on Schedule SE and elsewhere on the return.
Example: a rideshare driver's Schedule C
A part-time rideshare driver reports $18,000 of gross fares. They separately track $7,000 of vehicle expenses using the standard mileage method, plus $400 for a phone mount and dash cam listed as supplies.
Total expenses of $7,400 are subtracted from the $18,000 in gross income, leaving a net profit of $10,600 on Schedule C. That figure carries to Schedule SE for self-employment tax and to Form 1040 as income.
Frequently asked questions
Who needs to file Schedule C?
Can I file one Schedule C for two different side businesses?
What happens if my Schedule C shows a loss?
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.