Quick answer
Schedule C (Form 1040), Profit or Loss From Business, is where sole proprietors and single-member LLC owners report their business income and expenses. You list your income in Part I, your expenses in Part II, and the result on line 31 is your net profit (or loss). That number flows to your Form 1040 for income tax and to Schedule SE for self-employment tax.
Who files Schedule C?
- Freelancers, independent contractors and gig workers.
- Sole proprietors and single-member LLCs (unless taxed as an S-corp).
- Anyone running a business for profit, even part-time, alongside a W-2 job.
File one Schedule C per business. If you drive for Uber and also sell on Etsy, that’s usually two Schedule Cs.
What to gather first
- All 1099-NEC, 1099-MISC and 1099-K forms you received.
- Your own income records (invoices, bank deposits, platform reports), since not all income comes with a 1099.
- Receipts and your bookkeeping report by category.
- Your mileage log and home office measurements.
- Records of any equipment you bought (for depreciation).
The header: lines A to J
| Line | What to enter |
|---|---|
| A | Your main business activity (e.g., «Graphic design», «Rideshare driver») |
| B | The six-digit principal business code from the instructions (e.g., 541430 for graphic design) |
| C | Your business name or DBA, if any; leave blank if you use your own name |
| D | Your EIN, if you have one; otherwise leave blank |
| E | Business address, if different from your home |
| F | Accounting method: almost all freelancers use Cash |
| G | Did you «materially participate»? Usually Yes |
| H | Check if you started or bought the business this year |
| I-J | Did you make payments that required you to file 1099s, and did you file them? |
Part I: Income (lines 1-7)
| Line | What it means |
|---|---|
| 1 | Gross receipts or sales: all business income, with or without a 1099. Include 1099-K amounts but avoid double-counting payments also reported on a 1099-NEC. |
| 2 | Returns and allowances (refunds you gave customers) |
| 3 | Line 1 minus line 2 |
| 4 | Cost of goods sold, from Part III (only if you sell products) |
| 5 | Gross profit (line 3 minus line 4) |
| 6 | Other business income (e.g., business-related prizes, recovered bad debts, or a federal fuel tax credit or refund you received) |
| 7 | Gross income (line 5 plus line 6) |
Part II: Expenses (lines 8-27)
Only include expenses that are ordinary and necessary for your business. For items used partly for personal purposes, include only the business share.
| Line | Category | Freelancer examples |
|---|---|---|
| 8 | Advertising | Ads, website hosting for marketing, business cards |
| 9 | Car and truck expenses | Standard mileage (72.5¢/mile Jan-Jun 2026, 76¢ from July 1) or actual costs; also fill in Part IV |
| 10 | Commissions and fees | Platform fees (Upwork, Etsy), referral commissions |
| 11 | Contract labor | Subcontractors you paid (send 1099-NEC if over $2,000 in 2026) |
| 12 | Depletion | Rare for freelancers |
| 13 | Depreciation and section 179 | Laptops, cameras, equipment, from Form 4562 |
| 14 | Employee benefit programs | Only for employees, not yourself |
| 15 | Insurance (other than health) | Professional liability, business property insurance |
| 16 | Interest | Business loans and credit cards used only for business |
| 17 | Legal and professional services | CPA, tax preparer, lawyer, bookkeeper |
| 18 | Office expense | Postage, small office items, many software subscriptions |
| 19 | Pension and profit-sharing plans | Only for employees; your own SEP or Solo 401(k) goes on Schedule 1 |
| 20a / 20b | Rent or lease | Vehicles and equipment (20a); office or coworking space (20b) |
| 21 | Repairs and maintenance | Repairing business equipment |
| 22 | Supplies | Materials used up in your work |
| 23 | Taxes and licenses | Business licenses, state business fees, the employer half of payroll tax for employees (not your SE tax) |
| 24a | Travel | Flights, hotels and transport on business trips away from home |
| 24b | Deductible meals | Generally 50% of business meals |
| 25 | Utilities | Business-only phone lines and utilities for an outside office (home utilities go on line 30) |
| 26 | Wages | Employees’ wages, not payments to yourself |
| 27a | Other expenses | Anything else, itemized in Part V (e.g., software, education, bank fees, phone business share) |
Lines 28 to 32: from total expenses to net profit
| Line | What it means |
|---|---|
| 28 | Total expenses before home office |
| 29 | Tentative profit (line 7 minus line 28) |
| 30 | Business use of your home: use the simplified method ($5 per sq ft, up to 300 sq ft) or Form 8829 |
| 31 | Net profit or loss. This goes to Schedule 1 (line 3) and Schedule SE |
| 32 | At-risk box: almost all freelancers check 32a («All investment is at risk») |
Owner’s draws are never an expense, and neither are your own SE tax, income tax or personal health insurance (the latter can be a separate deduction on Schedule 1).
Parts III, IV and V
- Part III, Cost of goods sold: only for businesses that sell products: inventory at the start, purchases, materials and inventory at the end.
- Part IV, Vehicle information: when you placed the car in service, business, commuting and other miles, and whether you have written evidence. Required if you claim car expenses on line 9 without filing Form 4562.
- Part V, Other expenses: a list of anything in line 27a, with a clear description and amount.
Worked example: a freelance designer
Jordan received a $40,000 1099-NEC, $12,000 through a payment platform (1099-K) and $20,000 from clients who sent no form. Here’s a simplified Schedule C:
| Line | Item | Amount |
|---|---|---|
| 1 | Gross receipts ($40,000 + $12,000 + $20,000) | $72,000 |
| 7 | Gross income | $72,000 |
| 8 | Advertising | $600 |
| 9 | Car expenses (2,000 mi × 72.5¢ + 1,000 mi × 76¢) | $2,210 |
| 10 | Platform and payment fees | $2,400 |
| 13 | Laptop (section 179) | $1,800 |
| 15 | Professional liability insurance | $500 |
| 17 | Tax preparer | $900 |
| 18 | Office expense | $400 |
| 27a | Other: software $1,200 + phone (50%) $480 | $1,680 |
| 28 | Total expenses | $10,490 |
| 29 | Tentative profit | $61,510 |
| 30 | Home office, simplified (150 sq ft × $5) | $750 |
| 31 | Net profit | $60,760 |
Jordan’s $60,760 goes to Schedule SE (about $8,585 of self-employment tax) and to Form 1040.
Common mistakes that trigger IRS letters
- Leaving out income without a 1099. The IRS matches 1099s, but all income is reportable.
- Line 1 lower than your 1099 totals. If you report less than your forms show, expect a notice. If a 1099-K includes personal payments or refunds, report the full amount and back out the non-business part clearly.
- Personal expenses. Commuting, family meals and personal phone use aren’t deductible.
- 100% business use of a car without a mileage log.
- Round numbers everywhere. Use real figures from your records.
- Losses year after year without a real profit motive, which can look like a hobby.
Frequently asked questions
Do I need to file Schedule C if I made very little?
Yes, if you had any business income. If your net profit is $400 or more, you also file Schedule SE.
Can I file Schedule C if I also have a W-2 job?
Yes. You report your W-2 on Form 1040 and your side business on Schedule C.
What’s the difference between Schedule C and Schedule SE?
Schedule C calculates your business profit; Schedule SE uses that profit to calculate self-employment tax. See Schedule SE Explained.
Where do I deduct my health insurance and retirement contributions?
Not on Schedule C. They go on Schedule 1 of Form 1040 as adjustments to income.
What business code should I use?
Find the six-digit code that best matches your main activity in the list at the end of the Schedule C instructions.
This article is general information, not tax advice. Consult a CPA or Enrolled Agent for your situation.
Sources
- Standard mileage rates (IRS): 72.5 and 76 cents per mile in 2026.
- One Big Beautiful Bill Act changes 1099 thresholds (Avalara): $2,000 1099-NEC threshold.
Line numbers and descriptions follow the IRS Schedule C form and instructions. The simplified home office method ($5/sq ft, 300 sq ft) and 50% meals rule come from IRS guidance. The example is a FreelancerTaxHQ illustration.