Schedule C is the tax form you use to report business income and expenses if you're self-employed

Schedule C is an IRS form that goes with your personal tax return (Form 1040) to report profit or loss from a business you own and operate. If you're self-employed — whether you run a full-time business, freelance, drive for a rideshare company, or sell items online — you'll file Schedule C to tell the IRS how much money came in and what you spent to earn it.

The form calculates your net profit or loss, which then flows to your main tax return. That net number determines how much income tax you owe and how much self-employment tax (Social Security and Medicare) you pay. You file it alongside your 1040 when you submit your annual return.

Key Takeaways

  • Schedule C reports business income and expenses for self-employed people and sole proprietors, and the net profit or loss carries to your Form 1040.
  • You need Schedule C if you earned money from self-employment, including side work, freelancing, gig work, or running a business — even if it's part-time.
  • The form asks for gross income, then lets you subtract business expenses like supplies, equipment, home office, vehicle costs, and professional services.
  • Your net profit from Schedule C is used to calculate self-employment tax, which covers Social Security and Medicare contributions for self-employed people.
  • If you have no business expenses, you can file Schedule C-EZ (the shorter version), though Schedule C-EZ is no longer available for tax years after 2019.

Who files Schedule C and when

You file Schedule C if you're self-employed and earned income from a business, trade, or profession. This includes people who own their own business, freelancers, contractors, gig workers, and anyone who earned money outside a traditional W-2 job. If you received a 1099-NEC or 1099-MISC form from a client or platform, that's a signal you'll need Schedule C.

You file Schedule C with your tax return for the year you earned the income. If you're filing your 2023 taxes in 2024, you'll use the 2023 Schedule C form. The important date is the same as your overall tax return — normally April 15, though it can shift if that date falls on a weekend or holiday.

If you had no income and no expenses in a year, you don't file Schedule C that year. But if you had any self-employment income at all, you should file it even if you expect to owe no tax, because it affects your Social Security record.

What goes in the income section

Schedule C starts by asking for your gross income — the total money your business brought in before any expenses. This includes cash payments, checks, payments through apps like PayPal or Venmo, and the fair market value of any goods or services you received in trade.

If you sold physical items (inventory), you'll also report the cost of goods sold, which reduces your gross income to arrive at gross profit. For most service businesses and freelance work, you skip this step and report gross income directly.

You don't reduce your income by personal expenses, taxes you paid, or loan payments. Those don't belong on Schedule C. Only business-related costs go in the expense section that follows.

What business expenses you can deduct

Once you've reported income, Schedule C lets you subtract legitimate business expenses. These are costs you paid to earn that income. Common deductions include office supplies, software subscriptions, professional fees (accountant, lawyer), equipment under a certain cost threshold, vehicle expenses, home office space, insurance, and advertising.

You can deduct vehicle mileage if you drove for business — you either track actual expenses (gas, repairs, insurance) or use the standard mileage rate, which the IRS sets each year. For a home office, you can deduct a percentage of rent or mortgage interest, utilities, and repairs based on the square footage of your workspace.

You cannot deduct personal expenses, even if you use them partly for business. Meals are only deductible if they're for entertaining a client or employee, and only 50% of the cost counts. Clothing is not deductible unless it's a uniform required for work.

How net profit flows to your main tax return

After you subtract all your business expenses from your income, Schedule C shows your net profit or loss. This number transfers to your Form 1040, where it becomes part of your total income for the year.

If you had a net loss (expenses exceeded income), that loss can reduce your other income, which may lower your overall tax bill. However, there are limits on how much loss you can deduct in a single year, depending on your total income and the type of business.

Your net profit is also the amount used to calculate self-employment tax, which covers your Social Security and Medicare contributions. Even if your net profit is small, filing Schedule C ensures you're building your Social Security record.

Self-employment tax and Schedule SE

When you file Schedule C, you'll also file Schedule SE (Self-Employment Tax) to calculate how much Social Security and Medicare tax you owe. This is separate from income tax. Self-employed people pay both the employee and employer portion of these taxes, which adds up to about 15.3% of your net profit (though you can deduct half of it).

If your net profit from Schedule C is less than $400, you don't file Schedule SE. But if it's $400 or more, you must file it alongside your return. The self-employment tax you pay goes toward your Social Security benefits and Medicare coverage.

Schedule SE is straightforward — it mostly just takes the net profit from Schedule C and runs the calculation. Your tax software or accountant will handle it if you're using professional help.

Record-keeping and what to save

The IRS doesn't ask you to send receipts with your return, but you must keep them in case of an audit. Save invoices, receipts, bank statements, credit card statements, mileage logs, and any other proof of income and expenses for at least three years. Many people keep records for seven years to be safe.

Organize your records by category — income, vehicle expenses, supplies, professional services, and so on. This makes it easier to fill out Schedule C accurately each year and to defend your numbers if the IRS asks questions.

If you use accounting software or a spreadsheet to track income and expenses throughout the year, you'll have the totals ready when it's time to file. This takes much less time than gathering receipts in April.

Frequently Asked Questions

Do I need Schedule C if I have a side hustle or part-time business?

Yes. If you earned any self-employment income, you file Schedule C regardless of whether it's your main job or a side project. Even small amounts of freelance or gig work count. The only exception is if your net profit was under $400 for the year.

What's the difference between Schedule C and Schedule C-EZ?

Schedule C-EZ was a shorter form for people with no business expenses or very straightforward situations. The IRS stopped allowing it for tax years after 2019, so everyone now files the regular Schedule C. It's not much longer, and the extra lines just ask for expense details.

Can I deduct my home internet or phone bill?

Only the business portion. If you use your phone 50% for business and 50% personal, you can deduct 50% of the bill. For internet, you can deduct the percentage of time you use it for business. Keep records showing how you calculated the business use.

What if I had a loss instead of a profit?

Report it on Schedule C. A business loss can reduce your other income (like wages from a job), which may lower your tax bill. However, if you have losses for several years in a row, the IRS may question whether it's a real business or a hobby, which has different tax rules.

Do I file Schedule C for a side job where I got a W-2?

No. If your employer issued you a W-2, you report that income on your Form 1040 directly — you don't use Schedule C. Schedule C is only for self-employment income, which comes with a 1099 form or no form at all.