Schedule C.

In plain English

Schedule C, titled Profit or Loss From Business, is the form you attach to your personal Form 1040 to report money you made and spent running a business you own. You list your revenue at the top, subtract your business expenses (supplies, mileage, software, a home office, and so on), and the result is your net profit or loss. That net profit flows onto your 1040 as income and is also the number used to calculate self-employment tax. Most freelancers, gig workers, and one-owner businesses file it.

01Why it matters

Every legitimate expense you record on Schedule C lowers both your income tax and your self-employment tax, so sloppy bookkeeping here literally costs you money.

02The math, step by step

A freelance designer earns $40,000 and spends $3,000 on software, $1,500 on a laptop, and $1,000 in mileage. On Schedule C she reports $40,000 in revenue, subtracts $5,500 in expenses, and reports $34,500 in net profit. That $34,500 is what she pays income tax and self-employment tax on, not the full $40,000.

03What this is NOT

04Receipts

Every figure on this page is sourced to a primary document. Tap to open the original.