What expenses can I list on my Schedule C?

If you're self-employed, a sole proprietor, or an independent contractor, you can generally deduct ordinary and necessary business expenses on Schedule C. These deductions reduce your taxable business income.

For example, if your business earned $10,000 and you have $4,000 in deductible business expenses, you'll generally only pay tax on the remaining $6,000 of net profit.

Vehicle and Automobile Expenses

If you use a vehicle for your business, you may be able to deduct the business-use portion of your vehicle expenses.

You can choose one of two methods for each vehicle:

• Standard Mileage Rate
• Actual Car Expenses

You can only use one method per vehicle for a tax year. If the same vehicle is used for multiple businesses, you must allocate the expenses based on each business's use of the vehicle.

Standard Mileage Rate

To claim the standard mileage rate, enter your vehicle information in the Car and Truck Expenses section of Schedule C.

To use the standard mileage rate, you generally must choose that method in the first year the vehicle is available for business use. After the first year, you may be able to choose either the standard mileage rate or actual expenses, depending on your situation.

Actual Car Expenses

To deduct actual vehicle expenses, go to the Depreciation section of Schedule C.

1. Enter your vehicle in the Assets section.
2. Complete the Basic Information screens.
3. Open the Listed Property Information section.
4. Select the appropriate vehicle type.
5. Enter your mileage and actual vehicle expenses.

Actual vehicle expenses may include:

• Depreciation
• License and registration fees
• Gas and oil
• Lease payments
• Insurance
• Garage rent
• Repairs and maintenance
• Tires

Parking Fees and Tolls

Business-related parking fees and tolls may be deducted whether you use the standard mileage rate or actual expenses method.

However, parking fees at your regular workplace are generally considered commuting expenses and aren't deductible. Parking and tolls incurred while visiting clients or conducting business are generally deductible.

Business Use of Home Deduction

If you use part of your home regularly and exclusively for business, you may qualify for the home office deduction.

There are two methods available:

• Simplified Method
• Regular Method (Actual Expenses Method)

A space must generally be used exclusively for business purposes to qualify. If the area is used for both personal and business activities, it usually doesn't qualify. An exception may apply for qualified daycare providers.

You'll need to know:

• The total square footage of your home
• The square footage used exclusively for business

Simplified Method

The simplified method allows a deduction of:

• $5 per square foot
• Up to 300 square feet

This method can provide a maximum deduction of $1,500.

When using the simplified method, you don't enter direct or indirect home expenses.

Regular Method (Actual Expenses)

With the regular method, you'll enter your actual home-related expenses and allocate the business portion.

Direct Expenses

Direct expenses apply only to the business area of your home and are generally deductible in full.

Examples include:

• Repairs made only to the home office
• Painting only the business-use area

Indirect Expenses

Indirect expenses benefit the entire home and are generally deductible based on the percentage of your home used for business.

Examples include:

• Utilities
• Mortgage interest
• Homeowners insurance
• General repairs and maintenance

Unrelated Expenses

Expenses that apply only to personal areas of the home aren't deductible as a home office expense.

Examples include:

• Lawn care
• Repairs to non-business areas
• Painting rooms unrelated to your business

Home Office Depreciation

If you use the regular method and qualify for the home office deduction, you may also be able to depreciate the business portion of your home.

Only the building can be depreciated. Land is not depreciable.

General Business Expenses

Most Schedule C deductions are entered as general business expenses. These are the ordinary costs of running your business day to day.

Common examples include:

• Business licenses and permits
• Utilities
• Business insurance
• Office expenses
• Professional fees
• Advertising and marketing
• Supplies

Other Expenses

Use the Other Expenses section for business expenses that don't fit into another Schedule C category.

For each expense, enter:

• A description of the expense
• The amount paid

You can add multiple entries as needed.

How to Enter Schedule C Expenses in the Program

To enter your business expenses:

1. Select Federal.
2. Select Income (Select My Forms).
3. Open Profit or Loss From Business (Schedule C).
4. Go to General Expenses.
5. Enter your deductible business expenses in the appropriate category.

Keep Good Records

No matter which deductions you claim, keep receipts, mileage logs, invoices, and other records that support your expenses. Good documentation can help you accurately prepare your return and substantiate your deductions if the IRS requests additional information.