Schedule C (Form 1040) 2025

When To Use Fillable Schedule C 2025

Schedule C is attached to Form 1040 (or 1040-SR, 1040-SS, 1040-NR, or Form 1041 for an estate or trust) by:

• 1. Small business owners;
• 2. Independent contractors;
• 3. Freelancers;
• 4. Statutory employees;
• 5. Single-member LLC owners who are taxed as sole proprietors.

Businesses and professionals who work as sole proprietors use it to report income or loss for a year. It's also known as Profit or Loss From Business (Sole Proprietorship). Partnerships generally file Form 1065 instead.

Per Internal Revenue Service, the profit or loss statement should be filed if your activity qualifies as a business:

• 1. The main purpose of the activity is meant for income or profit.
• 2. The activity is continuous and regular.

The most common examples of sole proprietors are financial consultants, freelance designers, writers, photographers, artists, local bakeries, small shops, etc.

Note:

Hobby income never goes on Schedule C, whatever the amount and whether or not you received a Form 1099; it is still taxable and is reported on Schedule 1 (Form 1040), line 8j. Use Schedule C for income from your trade or business, including amounts shown on Forms 1099-NEC, 1099-MISC or 1099-K for that business. Receiving a 1099 does not by itself make an activity a business: rents on a 1099-MISC generally go on Schedule E, and hobby income on Schedule 1.

Schedule C Due Dates

Schedule C is due on the same date as your tax return. If you file your tax return electronically, you have until the due date of the return (including extensions) to file Schedule C.

For tax year 2025 the return is due April 15, 2026 for most calendar-year individual filers (some Form 1040-NR filers have until June 15) unless you request an extension. If you file Form 4868 by April 15, you get an automatic 6-month extension to file (not to pay) and can submit your return by October 15, 2026; any tax owed is still due April 15. An estate or trust filing Form 1041 requests its extension on Form 7004 instead (calendar-year 1041 returns then run to September 30, 2026). If you missed the deadline without an extension, file as soon as possible.

How To Fill Out a Schedule C Form 1040

Step 1: Prepare information

This step is crucial to accurately reporting your income and expenses, which affects your tax liability and potential deductions. Here's how to prepare:

• 1. Gather Basic Information such as your SSN or EIN, business name, address, accounting method (usually cash or accrual), and IRS business code that accurately describes your type of business.
• 2. Collect records of all business income received during the year (and, if you use the accrual method, income earned but not yet paid). This includes sales of goods, services rendered, and other income sources related to your business activity.

Note:

Make sure to include online sales with all the returns or allowances.

• 3. Gather all your expenses: receipts, invoices, bank and credit card statements, and records of all business-related expenses.
• 4. Categorize your expenses as accurately as possible (e.g., advertising, supplies, utilities, home office expenses).
• 5. If your business sells products, record inventory at the beginning and end of the year (a small business taxpayer may choose not to keep an inventory but must still account for it in a way that clearly reflects income). This is needed to calculate the cost of goods sold (COGS), which is crucial for businesses with inventory.
• 6. If you use your vehicle for business, maintain a detailed log of business-related mileage, gas, repairs, insurance, and other associated costs.
• 7. If you use part of your home regularly and exclusively for business, measure the square footage of your workspace to calculate the deduction accurately.
• 8. If you filed a Schedule C for 2024, review it. It can serve as a helpful guide in organizing your records and ensuring consistency in reporting.

Having all your Schedule C information ready ahead of time will make the whole process a lot easier for you. You'll catch all the deductions you deserve and get your taxes right. Think of it as doing future-you a solid for a relaxed tax filing.

Step 2: Get Printable Form 1040 Schedule C

Click the “Fill out Schedule C” button and start the process right there in the user-friendly editor with the support of AI Assistant.

Step 3: Start with your business info

Provide your personal information and the data on business or profession:

1. Name of proprietor: Write your full name here.
2. SSN: Enter your Social Security Number.
3. Line A: Describe your main business or professional activities and the product or service for which you receive income.

Note:

If you own more than one business, complete a separate Schedule C for each business.

1. Line B: Find an IRS code for your business activity and write it here.
2. Line C: If your business's name differs from yours, add it here.
3. Line D: Write your Employer ID Number, if you have one.
4. Line E: Provide your business street address. If you run the business from the home address shown on page 1 of your return, you can leave line E blank.

In this example, David Brown is a freelance graphic designer. He fills out his name, SSN, writes about his professional activity, and finds his business code in the IRS instructions.

He leaves lines C and D blank because he has no EIN or separate business name, and leaves line E blank because he works from the home address shown on his Form 1040.

Step 4: Accounting method and questionnaire

First of all, choose the accounting method that applies to you. Here are the simple explanations:

1. Cash Method: Imagine your business as a giant piggy bank. Every time someone puts money into it (pays you for your goods or services), you count that as income. And each time you take money out to pay for something (expenses), you count that as an expense. You only record the money when it moves in or out, like real cash changing hands.
2. Accrual Method: Think of your business as keeping a diary this time. Every time you make a sale or provide a service, even if you have yet to be paid, you write it down as income. And whenever you receive a bill or owe money for expenses, even if you still need to pay it, you mark it as an expense. Here, it's all about when the income or expense happens, not when the cash is exchanged.
3. Other Methods: This is like a mix-and-match approach. There are special rules for certain types of businesses or situations where both the cash and accrual methods partially capture what's going on. These could involve different ways of recording income or expenses based on the specifics of the business or industry.

These pictures are simplifications: the cash method counts income when it is actually or constructively received, and the accrual method generally deducts an expense once the liability is fixed and economic performance has occurred (Publication 334).

Next, answer the yes/no questions on lines G, I and J, and check the box on line H if you started or acquired the business during the year (Form 1040-SS filers skip lines G and I).

David chooses a cash accounting method as he receives payment for his services as soon as he finishes the job and doesn't issue invoices for his work. And answers all the questions.

Step 5: Income section

In this section, we calculate our business's gross profit and gross income:

1. Line 1: Enter your gross receipts or sales for the year, including income that no Form 1099 reported to you. In this example, David gathered all the 1099s that his clients sent him, checked them against his own records, and got the amount of $50,000.
2. Line 2: Enter your returns and allowances: refunds to customers and price reductions you granted during the year.
3. Line 3: Calculate your total income by subtracting line 2 from line 1. Since David had no returns, he copied the amount from line 1.
4. Line 4: To complete this line, you would need to move to Part III of the form and calculate the cost of goods sold. This calculation is needed only if you make or buy goods to sell. David sells services only, so he skips Part III and Line 4.
5. Line 5: Calculate a gross profit by subtracting line 4 from line 3 and write the amount here. In our case, it's still $50,000.00.
6. Line 6: Report other business income, such as a fuel tax credit or refund, or interest on business notes and receivables (ordinary bank interest goes on Form 1040 line 2b); rental real estate income generally belongs on Schedule E unless you provide significant services to tenants. Since David had no other income this year, he left this blank.
7. Line 7: Add lines 5 and 6 and enter the gross income. It's still $50,000.00 in our example.

Step 6: Expenses section

In part II, you need to report and calculate all your expenses. This is where you list and add up all the costs of running your business throughout the year. Think anything from rent for your office space, utilities, advertising, supplies, travel expenses, and business insurance premiums (any allowable self-employed health insurance deduction is claimed on Schedule 1, not here) to payments for professional services. This section helps you detail the money you've spent to keep your business going and can significantly impact your taxable income by lowering it.

Note:

When you produce or acquire property for resale, certain costs must be capitalized, that is, included in inventory (Part III) or in the basis of other property instead of deducted in Part II or V. Small business taxpayers (average annual gross receipts of $31 million or less for the three prior years and not a tax shelter) are not required to capitalize these costs, and freelance artists, authors and photographers may be exempt for property their own efforts create; Publication 538 lists the other exceptions.

Expenses for the business use of your home are claimed on line 30, through Form 8829 or the simplified method; do not enter them on lines 8 through 27b. The base rate of the first phone line into your home is never deductible; only separately identified business phone and internet charges go on line 25.

Here is an example of an expense list for our freelance graphic designer, David:

• 1. Line 8: $2,000.00 - for advertising on social media.
• 2. Line 18: $1,300.00 - for office supplies and printing.

Step 7: Calculate net profit or loss and home office deductions

At the end of Part II you are supposed to figure out whether your business brought you profit or loss this year and calculate the amount you can deduct for business use of your home:

1. Line 28: Add lines 8 through 27b to calculate total expenses and write the amount here. For David, it's $3,300.
2. Line 29: Subtract line 28 from line 7 to calculate your profit or loss. In our example, it's $46,700.
3. Line 30: If you elect the simplified method on a timely filed original return for a qualifying business use of your home, enter the total square footage of your home and the qualifying business area. Use the Simplified Method Worksheet in the Schedule C instructions: generally $5 per allowable square foot, up to 300 square feet, limited to gross income from the qualified business use of the home reduced by business deductions unrelated to the use of the home. Here David uses the simplified method: his qualifying home office was 100 square feet, used regularly and exclusively for business all year, and the income limit does not reduce his deduction, so 100 times $5 gives a $500 deduction on line 30.
4. Line 31 or 32: Subtract line 30 from line 29, and if you get a positive amount, congratulations! Your business is profitable. If you have prior-year unallowed passive activity losses, follow the line 31 instructions and Form 8582 before entering the amount. David has no such losses, so he enters $46,200 on line 31. If the amount is negative, apply the at-risk and passive activity limits before entering the allowed loss, check box 32a if all of your investment in the business is at risk, or 32b if some of it is not (Form 1040-SS filers skip line 32), and show the loss on the forms specified in Schedule C.

Note:

To deduct qualifying business use of your home, either use the simplified method on line 30 (no Form 8829) or fill out Form 8829 for 2025 using your actual home expenses and carry its result to line 30. Under the simplified method, mortgage interest and property taxes are treated as personal expenses; claim any allowable deduction on Schedule A if you itemize, subject to its limits. Do not enter expenses for the business use of your home on lines 8 through 27b.

Step 8: Cost of goods sold, vehicle, and other expenses

Use Part III if your business or profession requires inventory, materials and supplies, and labor expenses to calculate the cost of goods sold.

Note:

If you need to use part III of the form, keep all the information in your records. It's also better to consult a tax advisor about filling out this part.

If you use your vehicle to conduct business, complete Part IV (information on your vehicle) if you claim car or truck expenses on line 9 and do not have to file Form 4562; the line 9 amount itself is figured from your mileage or actual-expense records. Ordinary commuting is not deductible. Travel between a home office that qualifies as your principal place of business and another work location in the same trade or business can be deductible.

Use Part V for other expenses not listed in the form and write the total (line 48) on line 27b; line 27a is now the energy efficient commercial buildings deduction.

In our example, David didn't have to fill out any of these parts, so he just left them blank.

Step 9: Double-check & Print or Share

Double-check all the information you entered, click the "Export" button, and then the "Print File" option to print your Schedule C Form 1040. You can also choose the "Share" option and send the form to your tax advisor to check if all is correct.

Step 10: Fill out additional forms

The amount of profit or loss you calculated on this form should go to other forms to calculate how much taxes you owe or will receive as a refund.

If you have profit copy the amount from Line 31 and enter it:

• 1. on Line 2 of Schedule SE (Form 1040) to figure self-employment tax when Schedule SE is required (exclude Schedule C profit from statutory-employee services; nonresident aliens include it only if covered by U.S. social security under an international social security agreement). Fees for notarial services are exempt, but if you must file Schedule SE because of other self-employment income, include the Schedule C amount on line 2 and subtract the net notarial income in the line 3 adjustment as directed in the Schedule SE instructions;
• 2. on Line 3 of Schedule 1 (Form 1040) to calculate your additional income and adjustments;
• 3. an estate or trust enters the amount on Line 3 of Form 1041 instead of Schedule 1 and Schedule SE.

If you have loss you should enter it on the same lines and forms but as negative amount, after applying the at-risk and passive activity limits; a large loss may also be limited as an excess business loss (Form 461, 2025 threshold $313,000, or $626,000 on a joint return). And if you checked box 32b, because some of your investment is not at risk, fill out and attach Form 6198.

How To File Form 1040 Schedule C

Congratulations on reaching the stage where you're ready to submit Schedule C with your 1040! Here's how you can submit your Schedule C alongside your Form 1040 by the April 15, 2026 deadline (for tax year 2025):

1. By Mail

Attach all Schedules and forms to your completed Form 1040. Double-check the IRS instructions for the correct mailing address, as it can vary based on your state and whether you're including a payment. Mistakes in addressing could delay processing or cause your return to be misplaced, so it's worth a few extra minutes to verify.

2. eFiling

Another filing option for small business owners is eFiling. If your 2025 adjusted gross income is $89,000 or less, the IRS Free File program offers guided tax software from partner companies (each partner sets its own extra rules); above that limit Free File Fillable Forms are available. It's fast, secure, and you receive confirmation when the IRS accepts your return.