If you run a business as a sole proprietor or single-member LLC, Schedule C is where you report its income and expenses on your Form 1040. The profit you report here also drives your self-employment tax.
This guide explains who files, how the main lines work, the deductions the IRS instructions highlight, statutory employees and a worked example, based on the IRS Instructions for Schedule C (2025 edition).
The IRS says to use Schedule C to report income or loss from a business you operated or a profession you practiced as a sole proprietor. An activity is a business if your primary purpose is income or profit and you are involved with continuity and regularity; a sporadic activity, a not-for-profit activity or a hobby does not qualify. Schedule C is also used for wages and expenses as a statutory employee, for certain qualified joint ventures and for certain amounts on Forms 1099-MISC, 1099-NEC and 1099-K. See our Form 1099-K guide and 1099-NEC guide.
A single-member domestic LLC is generally not treated as a separate entity for federal income tax purposes, so its owner files Schedule C unless the LLC has elected to be taxed as a corporation. Compare structures in our sole proprietor vs LLC vs S corp guide.
| Step | What goes there |
|---|---|
| Line 1 | Gross receipts from your trade or business, including amounts on Forms 1099-NEC (attach a statement if the 1099-NEC total in box 1 is more than line 1) |
| Part II | Business expenses, such as car and truck, meals, other expenses and depreciation |
| Line 30 | Business use of your home, using Form 8829 or the simplified method |
| Line 31 | Net profit or loss; if expenses exceed gross income, the at-risk and passive activity rules are applied before you enter the loss |
| Other forms | Schedule SE for self-employment tax; Form 8995 or 8995-A for the qualified business income deduction |
The IRS also says the accounting method can be the cash method, an accrual method or another permitted method, but it must clearly reflect income. Self-employment tax on the profit is explained in our Schedule SE guide.
| Item | Amount |
|---|---|
| Gross receipts (line 1) | $85,000 |
| Total expenses | $27,500 |
| Net profit (line 31, no home office deduction) | $57,500 |
| Business mileage: 12,000 miles at the 2025 rate of 70 cents | $8,400 (included in the expenses above) |
| Business meals of $2,000 at 50% | $1,000 deductible |
The figures are our illustration of how the lines fit together, not a tax computation; the mileage and meals rules come from the IRS instructions. The mileage rate shown is the 2025 rate, the rate in the final 2025 instructions we used. For 2026 the IRS business rate is 72.5 cents a mile for January 1 to June 30 and 76 cents a mile from July 1, 2026 (Notice 2026-10 as modified by Announcement 2026-11), so 12,000 miles at 72.5 cents would be $8,700 and at 76 cents $9,120.
The 2025 instructions list several items worth knowing. The standard mileage rate for business use of a car was 70 cents per mile for 2025, and the business meals deduction is 50%. Certain qualified property acquired and placed in service after January 19, 2025 can take 100% bonus depreciation, and the maximum section 179 expense deduction is $2.5 million beginning in 2025; see our Section 179 guide. Under the de minimis safe harbor you can deduct up to $2,500 per item or invoice for tangible property if you have no applicable financial statement, or $5,000 if you do, and you report these as other expenses. For 2026 the IRS draft instructions show a maximum section 179 deduction of $2,560,000, reduced once qualifying property placed in service exceeds $4,090,000 (Rev. Proc. 2025-32); the draft instructions repeat the same $2,500 and $5,000 safe-harbor limits and the 50% meals limit, and add that no deduction is allowed after 2025 for meals an employer, including a sole proprietor, provides to employees at an employer-operated facility or for the convenience of the employer.
A statutory employee reports W-2 income and expenses on Schedule C with the statutory employee box checked on line 1. Social security and Medicare tax should already have been withheld, so you do not owe self-employment tax on those earnings. If you have both self-employment income and statutory employee income, you must file two Schedules C.
This guide's figures follow the final 2025 Schedule C instructions. The IRS posted draft 2026 instructions for Schedule C dated October 8, 2026, and a draft 2026 form; drafts are not final and the IRS says draft instructions usually change somewhat before release, so check the IRS Schedule C page for the final 2026 form and instructions before you file in 2027. The draft instructions list a new line 16b for the business-use portion of vehicle loan interest. Related forms: Schedule E for rentals and Schedule D for capital gains.
IRS: Instructions for Schedule C (Form 1040) 2025, IRS: Schedule C (Form 1040)., IRS: draft 2026 Instructions for Schedule C, IRS: Standard mileage rates, IRS: Rev. Proc. 2025-32.