As a self-employed individual, reporting expenses on Schedule C (Profit or Loss From Business) is essential for accurately calculating your net income. Here’s how you can do it:

  1. Eligibility:

    • Schedule C is used to report income or loss from a business you operated as a sole proprietor or a profession you practiced.
    • Ensure that your primary purpose for engaging in the activity is for income or profit, and you are involved in the activity with continuity and regularity.
  2. Gather Information:

    • Collect all relevant records of your business expenses, including receipts, invoices, and other documentation.
    • Expenses can include items like office supplies, advertising costs, travel expenses, utilities, and more.
  3. Complete Schedule C:

    • Use Schedule C (Form 1040) to report your business income and expenses.
    • On Part II, “Expenses,” you’ll find various expense categories. Enter the appropriate amounts in each category.
    • Common expense categories include:
      • Advertising
      • Car and truck expenses
      • Office supplies
      • Rent or lease of business property
      • Utilities
      • Travel expenses
      • Meals and entertainment
      • Insurance premiums
      • Legal and professional services
      • Depreciation
      • Other expenses
  4. Specific Expense Lines:

    • Some expenses have dedicated lines on Schedule C:
      • Line 8: Car and truck expenses (including mileage deduction)
      • Line 9: Other business expenses (combine various expenses not listed separately)
      • Line 13: Depreciation
      • Line 14: Other expenses (not included elsewhere)
  5. Home Office Deduction:

    • If you use part of your home exclusively for business, you may qualify for the home office deduction. Report this on Line 30.
    • Calculate the percentage of your home used for business and apply it to relevant expenses like rent, utilities, and insurance.
  6. Self-Employment Tax:

    • Use Schedule SE (Form 1040) to calculate your self-employment tax based on your net income from Schedule C.
    • The self-employment tax covers Social Security and Medicare contributions for self-employed individuals.
  7. Keep Detailed Records:

    • Maintain thorough records of your expenses throughout the year.
    • Use accounting software or spreadsheets to track income and expenses systematically.