Schedule C (Form 1040), Profit or Loss from Business, is the IRS form where sole proprietors and single-member LLCs report business income and expenses. It's attached to your personal Form 1040 — there's no separate business tax return. The net profit from Schedule C flows to two places: your Form 1040 (where it's taxed as income) and Schedule SE (where it's taxed at 15.3% for Social Security and Medicare).
If you receive a 1099-NEC, 1099-K, or earn any self-employment income — freelancing, gig work, consulting, selling products, providing services — you almost certainly need to file a Schedule C.
Who files a Schedule C
- Sole proprietors — the default business structure if you haven't formally organized as anything else
- Single-member LLCs — unless you've elected to be taxed as an S-corp or C-corp
- Independent contractors receiving 1099-NEC forms
- Gig workers — Uber, DoorDash, Instacart, Etsy, Upwork, Fiverr, etc.
- Side hustlers — even if you also have a W-2 job, freelance income goes on Schedule C
You do not file a Schedule C if your business is a partnership (use Form 1065), S-corporation (Form 1120-S), or C-corporation (Form 1120). Those are separate entity-level returns.
Line-by-line walkthrough
Schedule C has five parts. Here are the lines that matter most:
Part I: Income
Your total business income
Everything you earned from your business before any expenses. This should match (or exceed) the total of all 1099-NEC and 1099-K forms you received. If you earned income that wasn't reported on a 1099 — cash payments, invoices under the reporting threshold — it still goes here. The IRS expects you to report all income regardless of whether a 1099 was issued.
Only if you sell physical products
If you're a service-based freelancer (writer, designer, developer, driver), this line is zero. If you sell physical products (Etsy shop, reseller), your cost of materials and goods goes here. The calculation is detailed in Part III of Schedule C.
Gross receipts minus cost of goods sold
For most freelancers: this equals Line 1.
Part II: Expenses
This is where deductions happen. Every dollar of legitimate business expenses you enter here reduces your taxable profit — saving you income tax and self-employment tax.
Marketing and promotion costs
Website costs, Google/Facebook ads, business cards, portfolio hosting, domain registration, SEO tools, email marketing platforms.
Business vehicle costs
Either the standard mileage rate ($0.67/mile for 2025) times your business miles, or actual vehicle expenses times business-use percentage. Details go on Part IV of Schedule C (or Form 4562 for depreciation). This is the biggest deduction for gig drivers — see our rideshare deduction guide.
Payments to subcontractors
If you hire other freelancers or contractors for your business (a designer subcontracting a developer, for example), those payments go here. If you pay anyone $600+ in a year, you must issue them a 1099-NEC.
Business insurance only
Professional liability, general liability, business property insurance. Note: health insurance is not deducted here — it goes on Form 1040 as the self-employed health insurance deduction (a better position since it reduces AGI).
Accountant, attorney, and tax prep fees
The fee your CPA charges to prepare your Schedule C is deductible next year on... your Schedule C. Attorney fees for business contracts, trademarks, and formation are also here.
General office supplies and materials
Printer ink, paper, pens, filing supplies, small equipment under $200. For larger equipment (computers, monitors, furniture), use Line 13 (depreciation) or Section 179 to expense immediately.
Materials consumed in your work
Materials you use up in the course of business — cleaning supplies for a cleaner, fabric for a tailor, raw materials for a maker. Different from "office expense" in that these are directly related to producing your service or product.
Business-only utilities
If you have a separate business location, 100% of utilities. If working from home, utilities are part of the home office deduction (Line 30) — not claimed separately here.
The catch-all line
Anything that's a legitimate business expense but doesn't fit the named categories: software subscriptions, phone (business %), internet (business %), continuing education, professional memberships, bank fees on your business account, and more. List each item and amount in Part V of Schedule C.
Home office deduction
Calculated on Form 8829 (regular method) or using the simplified method ($5/sq ft, up to $1,500). Requires regular and exclusive business use of a dedicated space. This is one of the most commonly missed deductions for work-from-home freelancers.
The bottom line
This number determines your tax bill
Gross income (Line 7) minus total expenses (Line 28) minus home office (Line 30) = your net profit. This figure flows to Form 1040, Line 8 (as ordinary income) and to Schedule SE (for self-employment tax). It's the single most important number on your tax return as a freelancer — and every deduction you claim above reduces it.
The 5 most common Schedule C mistakes
1. Reporting net income instead of gross
Uber pays you $42,000 after their service fee. Your gross income is higher — the total fares before Uber's cut. The service fee is then deducted as a business expense on Line 10 (commissions/fees). Reporting only net understates both your income and your deductions.
2. Missing the home office deduction
If you work from a dedicated space at home, claim it. The simplified method ($5/sq ft) requires zero calculation — a 200 sq ft office is a $1,000 deduction with no forms beyond Schedule C itself.
3. Forgetting the QBI deduction
The 20% Qualified Business Income deduction (Section 199A) is not on Schedule C — it's on Form 1040. But it's calculated from your Schedule C profit. Most tax software handles this automatically, but if you're filing by hand, don't miss it. On $50,000 net profit, the QBI deduction is $10,000 — saving over $2,200 at the 22% bracket.
4. Not filing because you didn't get a 1099
Businesses are only required to issue 1099-NEC forms for payments of $600 or more. If you earned $500 from five different clients, you might not receive a single 1099 — but you earned $2,500 in taxable income that must be reported. The IRS filing requirement is based on income, not on whether a 1099 was issued.
5. Using the wrong business code
Line B asks for a six-digit NAICS business code. This doesn't affect your taxes, but using a clearly wrong code can draw attention. Common codes: 711510 (freelance writer/artist), 541511 (custom programming), 541430 (graphic design), 485300 (rideshare/taxi), 492110 (delivery services), 812990 (general personal services).
Do you need an EIN?
An Employer Identification Number (EIN) is a free nine-digit number from the IRS that identifies your business. You're not required to have one to file a Schedule C — sole proprietors can use their Social Security Number. However, getting an EIN is strongly recommended because it protects your SSN (you give clients and vendors your EIN instead), is required to open most business bank accounts, and is needed if you ever hire subcontractors or employees.
Getting an EIN is free and takes about 5 minutes online at irs.gov/ein. You receive it immediately. There is no downside to having one.
Schedule C and quarterly taxes
Your quarterly estimated tax payments are essentially an advance on what your Schedule C will show at year's end. Estimating your quarterly payments accurately requires a rough projection of your Schedule C profit — which is why understanding this form makes the whole quarterly tax process easier. If you're unsure how much to set aside, your prior year's Schedule C, Line 31 is the best starting point.