Schedule C: Business Income and Expenses Basics
Published November 6, 2026
If you run a business by yourself, the IRS treats you as a sole proprietor. You report that business on Schedule C (Form 1040), Profit or Loss From Business. This guide explains who files it, what goes on it, and how it connects to the rest of your return. It is general information. It is not advice about your return.
Who files Schedule C
A sole proprietor owns an unincorporated business alone. Publication 334 says that you report that business's income and expenses on Schedule C and attach it to Form 1040 or Form 1040-SR. A single-member LLC that is not treated as a corporation is usually reported the same way. Statutory employees also use Schedule C to report their wages and expenses.
Publication 334 also says you have to file an income tax return for 2025 if your net earnings from self-employment were $400 or more.
What goes on the form
Schedule C starts with the money your business took in. Then it lists the business expenses you paid. The difference is your net profit or your net loss. Your net profit then moves to the rest of your return. It is also used to figure self-employment tax.
If you run the business with your spouse and you share the profits and losses, the business is a partnership. In that case, do not use Schedule C. Publication 334 says to file Form 1065 instead.
What counts as a business expense
To be deductible, a business expense must be both ordinary and necessary. Publication 334 explains both words. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.
Publication 334 has a chapter on business expenses. It covers topics such as local transportation and travel. Read the section for each category before you deduct it. If you are not sure whether an expense counts, check the chapter first.
Cash method and inventory
Publication 334 says most individuals and many sole proprietors with no inventory use the cash method of accounting. That method is usually easier to keep records for. If you must account for inventory to show your income, you generally must use an accrual method for sales and purchases. A small business taxpayer is an exception, and Publication 334 explains that rule.
Keep the records that support each amount
Keep the papers that support every amount on Schedule C. That usually means sales records, bank statements, invoices you sent, and receipts for expenses. Publication 334 lists Publication 925, Recordkeeping and starting a business, as a related guide. Our guide to how long to keep tax records explains how long to hold on to them.
Keep records for each year separately. A clean folder for each tax year makes it easier to find the support for a line on Schedule C if a question comes up later.
After Schedule C
If your net earnings from self-employment were $400 or more, you must also file Schedule SE. Publication 334 gives the self-employment tax rate on net earnings as 15.3%. That rate is 12.4% for social security tax plus 2.9% for Medicare tax. Our guide to self-employment tax basics explains how Schedule SE works.
If you expect to owe tax for the year, you may need to make estimated tax payments. Our guide to estimated tax safe harbor rules explains one set of rules for that.
Upload your documents and answer a few simple questions. Your preparer reviews every deduction and credit and lets you know when your return is ready to sign.
Sources: Sources: IRS, Publication 334 (2025), Tax Guide for Small Business (https://www.irs.gov/pub/irs-pdf/p334.pdf); IRS, Instructions for Schedule C (Form 1040) (2025) (https://www.irs.gov/pub/irs-pdf/i1040sc.pdf) This is general information, not advice about your specific return.
