1040

Profit or Loss From Business (Sole Proprietorship)

Agency
IRS
Revision
2025
Fillable fields
105
Pages
2
Official source
IRS form page
Checked
October 14, 2026
Fill 1040 online
Page 1 of form 1040

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

Schedule C is the form a sole proprietor uses to report the income and expenses of a business. It starts with what the business took in, subtracts the cost of running it, and ends with a net profit or loss that moves onto your Form 1040.

It matters to freelancers, consultants, gig workers, contractors and anyone who sells goods or services under their own name or a single-owner business. Nobody withholds tax from that income, so the profit on Schedule C also drives self-employment tax on Schedule SE and often estimated tax payments.

The IRS looks at the business activity as a whole. The figures you enter here should match your books and any Forms 1099 you received.

Page 1 of Schedule C (Form 1040), Profit or Loss From Business, with the business details at the top and Part I below

What's on Schedule C

Business details at the top

You enter the business name, a six-digit principal business code on line B, an EIN on line D only if the instructions require one, the accounting method on line F and whether you materially participated on line G.

Part I: Income

Gross receipts go on line 1, returns and allowances on line 2, and other business income on line 6.

Part II: Expenses

Lines 8 through 27a list common costs such as car and truck expenses on line 9, depreciation on line 13 and legal and professional services on line 17. Expenses for business use of your home appear in this part and on line 30.

Part III: Cost of goods sold

If you sell products, you figure the cost of the inventory here. The instructions note an exception for small business taxpayers.

Part IV: Vehicle information

You complete it when you claim car and truck expenses and the instructions require the details.

Part V: Other expenses

Costs that do not have their own line are listed here and the total carries to line 27b on the 2025 form.

Line 31: Net profit or loss

The result goes to your return and to Schedule SE. The instructions note that losses may be limited by the excess business loss rules on Form 461 or the passive activity rules on Form 8582.

How to fill out Schedule C

  1. 1

    Describe the business

    Name it, choose the six-digit code that best describes what you do and enter your address.

    Schedule C business name and six-digit principal business code entered for a sample freelance business, sample values
  2. 2

    Pick an accounting method

    Cash, accrual or another method that clearly reflects income. The instructions say accrual is required for inventory purchases and sales unless you are a small business taxpayer.

    Schedule C line F with the cash accounting method checked, sample values
  3. 3

    Do not use your SSN as an EIN

    The instructions say to enter an EIN on line D only if you have a qualified retirement plan, must file certain employment or excise returns, or pay gambling winnings.

    Schedule C line D for the employer ID number, left blank unless the instructions require one
  4. 4

    Answer the material participation question

    Check Yes if you meet one of the seven material participation tests. If you do not, the activity is passive.

    Schedule C line G with Yes checked for material participation, sample values
  5. 5

    Enter income in Part I

    Add up all gross receipts, including amounts reported on Forms 1099, and subtract returns and allowances.

    Schedule C Part I line 1 gross receipts and line 2 returns and allowances, sample values
  6. 6

    Enter expenses in Part II

    Use only business costs. Attach Form 4562 for depreciation on property placed in service in 2025, listed property, or a section 179 deduction.

    Schedule C Part II lines 8 to 13 with car and truck on line 9 and depreciation on line 13, sample values
  7. 7

    Handle a home office

    Use Form 8829 for actual expenses, or the simplified method of $5 per square foot up to 300 square feet. You can fill this form free on this page.

    Schedule C line 30 for business use of the home with simplified method square footage entered, sample values
  8. 8

    Carry the profit to Schedule SE and Form 1040

    Line 31 is the net profit or loss that flows to the rest of your return.

    Schedule C line 31 net profit that carries to Schedule 1 line 3 and Schedule SE line 2, sample values

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Deadlines, fees and where to send Schedule C

Deadline

Schedule C is part of your Form 1040 and is due with it.

Where it goes

Attach it to Form 1040 when you mail, or let tax software transmit it when you e-file.

Cost

The IRS form is free.

Records

Keep receipts, mileage logs and bank statements that support each expense.

Common mistakes

Mixing personal and business costs, skipping Schedule SE, using an SSN where an EIN belongs and entering gross receipts that do not match Forms 1099 are the errors that draw attention.

Related forms

Who files Schedule C?

  • Sole proprietors

    The IRS page says Schedule C reports income or loss from a business you operated or a profession you practiced as a sole proprietor.

  • People whose activity counts as a business

    The IRS says an activity qualifies as a business if your main reason for it is to earn income or profit, and you carry it on regularly and continuously.

  • Freelancers and independent contractors

    If clients paid you on Form 1099-NEC or 1099-K, the income goes here with your other business receipts.

  • Statutory employees

    The instructions say to report W-2 income marked as statutory employee on Schedule C. If you also have other self-employment income, you must file two Schedules C.

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Questions about Form 1040

Do I need to file Schedule C if I made only a little money?

The instructions treat an activity as a business if you carry it on regularly and mainly to earn a profit. Net self-employment earnings of $400 or more also trigger a filing requirement for Schedule SE.

What is the difference between Schedule C and Schedule SE?

Schedule C figures your business profit or loss. Schedule SE figures self-employment tax on that profit.

Can I deduct a home office?

Yes if you qualify. Use Form 8829 for actual expenses or the simplified method of $5 per square foot, up to 300 square feet.

Do I enter my SSN as the EIN?

No. Leave line D blank unless you need an EIN under the instructions.

Can I deduct a business loss?

A loss goes to your return on line 31, but the instructions say it may be limited by the excess business loss and passive activity rules.