What Is Schedule C?
Quick Answer
Schedule C (Profit or Loss From Business) is the IRS form where sole proprietors and single-member LLCs report their business income and expenses. Your net profit from Schedule C flows to your personal Form 1040 as taxable income and is also used to calculate self-employment tax on Schedule SE. If you are a freelancer, independent contractor, or have any side hustle income, you likely need to file this form.
What Goes on Schedule C
Part I: Income
- Line 1: Gross receipts or sales (total income from clients/customers)
- Line 2: Returns and allowances
- Line 4: Cost of goods sold (if you sell products)
- Line 7: Gross income (Line 1 minus COGS and returns)
Part II: Expenses
This is where you deduct all business expenses:
| Expense Category | Examples |
|---|---|
| Advertising | Website, online ads, business cards |
| Car and truck | Mileage (67 cents/mile in 2025) or actual expenses |
| Contract labor | Subcontractors, virtual assistants |
| Insurance | Business liability, errors & omissions |
| Office expense | Supplies, software subscriptions |
| Professional services | Accounting, legal fees |
| Rent | Office or co-working space |
| Utilities | Phone, internet (business portion) |
| Home office | Reported on Form 8829 or simplified method |
| Other | Domain names, education, tools |
Part III: Cost of Goods Sold
Only relevant if you sell physical products.
Part V: Other Expenses
Catch-all for expenses that do not fit the standard categories.
Real Example With Actual Numbers
Priya is a freelance web developer in Texas earning $110,000 in gross revenue.
| Item | Amount |
|---|---|
| Gross income | $110,000 |
| Software subscriptions | -$3,600 |
| Computer equipment (depreciation) | -$2,000 |
| Home office (simplified: 300 sq ft x $5) | -$1,500 |
| Internet (50% business use) | -$900 |
| Professional development | -$1,200 |
| Accounting fees | -$800 |
| Business insurance | -$1,400 |
| Coworking space (3 months) | -$1,200 |
| Travel to clients | -$2,400 |
| Total expenses | -$15,000 |
| Net profit (Line 31) | $95,000 |
This $95,000 net profit:
- Goes to Form 1040, Line 8 as income
- Goes to Schedule SE to calculate self-employment tax ($95,000 x 92.35% x 15.3% = $13,419)
- Is reduced by the QBI deduction if eligible (up to 20% = $19,000 off taxable income)
Use the freelance calculator to see how your expenses and income translate to take-home pay.
Common Schedule C Mistakes
- Not deducting enough: Many freelancers leave money on the table by not tracking all legitimate expenses. See the full list of freelancer deductions
- Mixing personal and business expenses: Keep separate bank accounts and credit cards for business
- Forgetting the home office: If you have a dedicated workspace, the home office deduction is available
- Not filing when you should: Even gig work and side income over $400 requires a Schedule C
- Reporting gross instead of net: Your 1099 shows gross payments, but you report net (after expenses) on Schedule C
Schedule C and Business Structure
Schedule C is specifically for sole proprietors and single-member LLCs (taxed as disregarded entities). Other structures file differently:
| Business Type | Tax Form |
|---|---|
| Sole proprietor | Schedule C |
| Single-member LLC | Schedule C (default) |
| Partnership / Multi-member LLC | Form 1065 |
| S-Corporation | Form 1120-S |
| C-Corporation | Form 1120 |
If you are considering a different structure, see sole proprietor vs LLC or how to pay yourself as a business owner.
Estimate your Schedule C income and resulting taxes at the freelance calculator or use the SalaryHog calculator for your W-2 income.