Home / Schedule C
Schedule C

Profit or Loss from Business (Sole Proprietorship)

Use this when: You have self-employment income from gig work, freelancing, or running your own business as a sole proprietor or single-member LLC.

Who needs it: Gig workers, freelancers, contractors, sole proprietors, single-member LLC owners
When to file: Attach to your Form 1040 when filing your annual tax return (usually April 15)
Where it goes: Attaches to your 1040, page 1. The profit/loss flows to Line 3 of your 1040.
Read Line-by-Line Guide Download Official IRS Form

Advertisement

Line-by-Line Instructions

Box A Principal business or profession code

What it is: Your NAICS code — a 6-digit number that describes what your business does.

For all gig workers and business owners:

→ Find your NAICS code and enter it here

WHY: The IRS uses this to compare your income and expenses against similar businesses. It helps them spot unusual deductions.
HOW TO FIND YOUR CODE:

Use our free tool: naicscodefinder.com

Search by keyword (e.g., "social media", "rideshare", "graphic design") and it shows your 6-digit code.

EXAMPLES:
  • Téa's freelance social media work: 541613 (Marketing Consulting Services)
  • DoorDash/Uber Eats driver: 492110 (Couriers and Messengers)
  • Rideshare driver: 485310 (Taxi Service)
  • Freelance writer: 711510 (Independent Artists, Writers, and Performers)
⚠ IMPORTANT: Don't leave this blank. If you're not sure, use the closest match. The IRS won't reject your return over the NAICS code, but having one looks more professional.
Box B Enter code from instructions

What it is: A single letter code that describes your business type.

Most common codes for gig workers:

Code: (blank)

Most gig workers leave this blank

Example: Téa does freelance social media work → leaves blank

Code: 1

Wholesale or retail trade

Example: You buy products and resell them

Code: 3

Transportation

Example: Rideshare or delivery drivers

WHY: It's for IRS statistical tracking. Doesn't affect your tax calculation.
Box C Business name

What it is: Your business name (if you have one) or leave blank.

If you have a business name:

→ Put your business name or DBA here

If you work under your own name:

→ Leave this blank

EXAMPLES:
  • Téa has an LLC: "Téa's Creative Services LLC"
  • Gig worker with no business name: [blank]
  • Freelancer with DBA: "Martinez Media Services"
Part I Income

What this section does: Adds up all your business income.

Line 1 Gross receipts or sales

What it is: Total money you earned from your business before any expenses.

How to calculate it:

→ Add up ALL income from this business

WHAT TO INCLUDE:
  • 1099-NEC income (contractor payments)
  • 1099-K income (payment app income like Venmo, PayPal)
  • Cash payments
  • Checks
  • Credit card payments
  • DoorDash/Uber earnings (from your annual summary)
EXAMPLE:

Téa's income sources:

  • 1099-NEC from Client A: $4,200
  • 1099-NEC from Client B: $2,300
  • Cash payments (tracked in spreadsheet): $1,800
  • Venmo payments (from personal records): $900

Line 1 total: $9,200

⚠ IMPORTANT: Report ALL income, even if you didn't get a 1099. The IRS can see payments through third-party processors. Under-reporting triggers audits.
Part II Expenses

What this section does: Subtracts your business expenses from your income to calculate your profit.

Key expense categories for gig workers:

Most Common Expenses:
  • Car and truck expenses (Line 9)
  • Commissions and fees (Line 10) — app fees, payment processing
  • Depreciation (Line 13) — equipment, computers, phones
  • Insurance (Line 15) — business liability, extra car coverage
  • Supplies (Line 22) — materials, office supplies
  • Travel (Line 24a) — airfare, hotels for business trips
  • Meals (Line 24b) — 50% deductible if business-related
What You CAN'T Deduct:
  • Personal meals (not business-related)
  • Commuting to/from your regular workplace
  • Personal phone/internet (only business portion)
  • Gym memberships
  • Regular clothes (must be specialized work attire)
  • Traffic tickets or parking violations
WHY EXPENSES MATTER: Every dollar you deduct reduces your taxable income. Lower taxable income = lower tax bill AND lower self-employment tax.
Line 9 Car and truck expenses

What it is: Vehicle costs for business driving.

Two methods to choose from:

Standard Mileage Rate (easier):

2024 rate: $0.67 per mile

→ Multiply business miles × $0.67

Example: Téa drove 5,000 business miles → 5,000 × $0.67 = $3,350

Actual Expenses (more complex):

Track: gas, oil, repairs, insurance, registration, lease payments, depreciation

→ Multiply total car costs × business use %

Example: $8,000 total costs, 60% business use → $4,800

⚠ RIDESHARE/DELIVERY DRIVERS: Use a mileage tracking app (MileIQ, Stride, Everlance). The IRS requires contemporaneous records — you can't recreate mileage from memory.
WHY: This is usually the biggest deduction for gig workers who drive. Don't skip it.
Line 10 Commissions and fees

What it is: Fees you paid to do business (NOT your own fees that you charged clients).

What goes here:

→ Platform fees, payment processing fees, referral fees

EXAMPLES:
  • DoorDash service fees deducted from your pay
  • Upwork/Fiverr platform fees (they take 20% of your earnings)
  • PayPal/Stripe processing fees (2.9% + $0.30 per transaction)
  • Real estate agent referral fees
⚠ COMMON MISTAKE: Don't double-count. If DoorDash already deducted the fee before paying you, don't deduct it again here.
Line 22 Supplies

What it is: Materials you use up in your business.

What counts as supplies:

EXAMPLES:
  • Delivery drivers: Insulated bags, phone mounts, water bottles for customers
  • Freelance writers: Printer paper, ink cartridges, notebooks
  • Social media managers: Stock photos, design templates, scheduling tool subscriptions
  • Contractors: Materials specific to each job
SUPPLIES vs. EQUIPMENT: Supplies = used up quickly (deduct full cost this year). Equipment = lasts multiple years (depreciate using Form 4562).
Line 30 Expenses for business use of your home

What it is: Home office deduction (if you qualify).

Two requirements to deduct:

  1. Exclusive use: The space is used ONLY for business (not your kitchen table)
  2. Regular use: You work there consistently
TWO METHODS:

Simplified method (easier): $5 per square foot, max 300 sq ft = max $1,500

Actual expenses: Use Form 8829 to calculate percentage of rent, utilities, insurance, repairs

EXAMPLE:

Téa uses a 150 sq ft bedroom exclusively for her social media business.

Simplified method: 150 × $5 = $750 deduction

⚠ WARNING: If you work from coffee shops or coworking spaces most of the time, you probably don't qualify for home office. The IRS is strict about "principal place of business."
Line 31 Net profit or (loss)

What it is: Your bottom line — income minus expenses.

The math:

→ Line 7 (Gross income) - Line 28 (Total expenses) = Line 31 (Net profit or loss)

TÉA'S SCHEDULE C:
  • Line 1 (Gross receipts): $14,000
  • Line 28 (Total expenses): $5,200
  • Line 31 (Net profit): $8,800
WHAT HAPPENS NEXT: This number flows to your Form 1040, Line 3. It also goes on Schedule SE to calculate your self-employment tax.
⚠ IF YOU HAVE A LOSS: Put parentheses around it: ($2,500). You can usually deduct losses against other income, but there are limits if you have a day job with a W-2.

Common Mistakes to Avoid

1

Not tracking mileage

Why it's wrong: You're leaving thousands of dollars on the table. At $0.67/mile, 10,000 miles = $6,700 deduction.

Fix: Use a mileage tracking app (MileIQ, Stride, Everlance) starting TODAY. You can't recreate mileage from memory.

2

Forgetting platform fees

Why it's wrong: Your 1099 shows gross income BEFORE platform fees. If you don't deduct the fees, you're paying tax on money you never received.

Fix: Check your year-end statement from Upwork, DoorDash, etc. It shows total fees. Deduct them on Line 10.

3

Using standard mileage AND actual expenses

Why it's wrong: You must pick ONE method per vehicle per year. You can't double-dip.

Fix: Calculate both ways, pick whichever gives you the bigger deduction, then stick with it for that vehicle.

4

Claiming 100% business use on shared vehicle

Why it's wrong: The IRS knows you don't drive ONLY for work. Claiming 100% is a red flag.

Fix: Be honest. Track business vs. personal miles. Most gig workers are 50-80% business use.

5

Missing the NAICS code

Why it's wrong: It looks unprofessional and can slow down processing.

Fix: Use naicscodefinder.com — takes 30 seconds.

Advertisement

You Might Also Need

Schedule SE

Self-Employment Tax

Calculate Social Security and Medicare tax on your Schedule C profit
Form 4562

Depreciation and Amortization

Deduct vehicle costs and equipment purchases over multiple years
Form 8829

Expenses for Business Use of Home

Detailed calculation for home office deduction if you use actual expenses

Additional Resources

Official IRS Resources

Related Guides

Free Tools

Need More Tax Help?

The Gen Z Tax Playbook walks you through your entire tax return — including Schedule C with Téa's complete example. Real forms, real examples, plain English.

Get the Tax Playbook