Muotokuva 1040 Aikataulu C Ohjeet
Ohjeet C-aikataululle (lomake 1040 tai 1040-SR), voiton tai tappion liiketoiminnasta (yksinomainen omistus)
2023
Liittyvät lomakkeet
- Muotokuva 1040 Aikataulu C - Liiketoiminnan voitto tai tappio (yksinomainen yritys)
Department of the Treasury
Internal Revenue Service
2023 Instructions for Schedule C
Use Schedule C (Form 1040) to report income or (loss) from a business you operated
or a profession you practiced as a sole proprietor. An activity qualifies as a business if
your primary purpose for engaging in the activity is for income or profit and you are
involved in the activity with continuity and regularity. For example, a sporadic activi-
ty, a not-for-profit activity, or a hobby does not qualify as a business. To report income
from a nonbusiness activity, see the instructions for Schedule 1 (Form 1040), line 8j.
Profit or Loss
From Business
Also, use Schedule C to report (a) wages and expenses you had as a statutory em-
ployee; (b) income and deductions of certain qualified joint ventures; and (c) certain
amounts shown on a Form 1099, such as Form 1099-MISC, Form 1099-NEC, and
Form 1099-K. See the instructions on your Form 1099 for more information about
what to report on Schedule C.
You may be subject to state and local taxes and other requirements such as business
licenses and fees. Check with your state and local governments for more information.
Section references are to the Internal
Revenue Code unless otherwise noted.
cial clean vehicle may qualify for a
clean vehicle tax credit. See Form 8936
and its instructions for more informa-
tion.
Form 1040, 1040-SR, Schedules C, E, F,
or Form 2106, as well as small business
taxpayers with assets under $10 million.
For additional information, go to the
Small Business and Self-Employed Tax
Future Developments
For the latest information about devel-
opments related to Schedule C and its
instructions, such as legislation enacted
after they were published, go to IRS.gov/
Reminders
Gig economy tax center. The gig (or
on-demand, sharing, or access) economy
refers to an activity where people earn
income providing on-demand work,
get more information about the tax con-
sequences of participating in the gig
economy.
General
Instructions
What's New
Other Schedules and Forms
You May Have To File
Redesigned Form 1040-SS. For 2023,
Schedule C (Form 1040) is available to
be filed with Form 1040-SS, if applica-
ble. It replaces Form 1040-SS, Part IV.
For additional information, see the In-
structions for Form 1040-SS.
Schedule A (Form 1040) to deduct
interest, taxes, and casualty losses not
related to your business.
•
Excess business loss limitation. If you
report a loss on line 31 of your Sched-
ule C (Form 1040), you may be subject
to a business loss limitation. The disal-
lowed loss resulting from the limitation
will not be reflected on line 31 of your
Schedule C. Instead, use Form 461 to
determine the amount of your excess
business loss, which will be included as
income on Schedule 1 (Form 1040),
line 8p. Any disallowed loss resulting
from this limitation will be treated as a
net operating loss that must be carried
forward and deducted in a subsequent
year.
Schedule E (Form 1040) to report
•
rental real estate and royalty income or
(loss) that is not subject to
self-employment tax.
Standard mileage rate. The business
standard mileage rate for 2023 is 65.5
cents per mile.
Schedule F (Form 1040) to report
profit or (loss) from farming.
•
Business meals deduction. The tempo-
rary 100% deduction for food or bever-
ages provided by a restaurant has ex-
pired. The business meals deduction is
now 50%.
Schedule J (Form 1040) to figure
•
your tax by averaging your farming or
fishing income over the previous 3
years. Doing so may reduce your tax.
Schedule SE (Form 1040) to pay
self-employment tax on income from
any trade or business.
•
Energy efficient commercial buildings
deduction. The energy efficient com-
mercial buildings deduction is now re-
ported on new line 27b.
Form 461 to report an excess
business loss.
•
See Form 461 and its instructions for
details on the excess business loss limi-
tation.
Bonus depreciation. The bonus depre-
ciation deduction under section 168(k)
begins its phaseout in 2023 with a re-
duction of the applicable limit from
100% to 80%.
Form 3800 to claim any of the
general business credits.
•
Form 4562 to claim depreciation
•
Small Business and Self-Employed
(SB/SE) Tax Center. Do you need help
with a tax issue or preparing your return,
or do you need a free publication or
form? SB/SE serves taxpayers who file
and amortization on assets placed in
service in 2023, to claim amortization
that began in 2023, to make an election
under section 179 to expense certain
Commercial clean vehicle credit.
Businesses that buy a qualified commer-
Jan 24, 2024
Cat. No. 24329W
C-1
property, or to report information on
listed property.
Each materially participate in the
er, in the instructions for line G);
Are the only owners of the busi-
ness; and
•
Heavy highway vehicle use tax. If you
use certain highway trucks, truck-trail-
ers, tractor-trailers, or buses in your
trade or business, you may have to pay a
federal highway motor vehicle use tax.
See the Instructions for Form 2290 to
find out if you must pay this tax and go
developments.
Form 4684 to report a casualty or
•
theft gain or (loss) involving property
used in your trade or business or
income-producing property.
•
File a joint return for the tax year.
•
Form 4797 to report sales,
•
Making the election will allow you to
avoid the complexity of Form 1065, but
still give each of you credit for social se-
curity earnings on which retirement ben-
efits, disability benefits, survivor bene-
fits, and insurance (Medicare) benefits
are based. In most cases, this election
will not increase the total tax owed on
the joint return.
exchanges, and involuntary conversions
(not from a casualty or theft) of trade or
business property.
Information returns. You may have to
file information returns for wages paid
to employees, and certain payments of
fees and other nonemployee compensa-
tion, interest, rents, royalties, real estate
transactions, annuities, and pensions.
Instructions for Certain Information Re-
turns for details and other payments that
may require you to file a Form 1099.
Form 6198 to apply a limitation to
your loss if you have a business loss and
you have amounts invested in the
•
business for which you are not at risk.
Form 6252 to report income from
an installment agreement.
•
Jointly owned property. You and your
spouse must operate a business to make
this election. Do not make the election
for jointly owned property that is not a
trade or business.
Form 7205 to claim the IRC 179D
deduction for qualifying energy efficient
commercial building expenses.
•
Form 8582 to apply a limitation to
your loss from passive activities.
•
If you received cash of more than
$10,000 in one or more related transac-
tions in your trade or business, you may
have to file Form 8300. For details, see
Pub. 1544. See also the IRS Form 8300
Reference Guide, available at IRS.gov/
Only businesses that are owned
Form 8594 to report certain
purchases or sales of groups of assets
that constitute a trade or business.
•
and operated by spouses as
co-owners (and not in the name
!
CAUTION
of a state law entity) qualify for the elec-
tion. Thus, a business owned and oper-
ated by spouses through an LLC does
not qualify for the election of a qualified
joint venture.
Form 8824 to report like-kind
exchanges.
•
Form 8829 to claim actual
expenses for business use of your home.
•
Form 8936 to claim the
commercial clean vehicle credit.
•
Business Owned and
Operated by Spouses
Making the election. To make this
election, divide all items of income,
gain, loss, deduction, and credit attribut-
able to the business between you and
your spouse based on your respective in-
terests in the business. Each of you must
file a separate Schedule C or F. Enter
your share of the applicable income, de-
duction, or (loss) on the appropriate
lines of your separate Schedule C or F.
Each of you may also need to file a sep-
arate Schedule SE to pay self-employ-
ment tax. If the business was taxed as a
partnership before you made the elec-
tion, the partnership will be treated as
terminating at the end of the preceding
tax year. For information on how to re-
port the termination of the partnership,
see Pub. 541.
Form 8960 to pay Net Investment
Income Tax on certain income from
your passive activities.
•
Generally, if you and your spouse jointly
own and operate an unincorporated busi-
ness and share in the profits and losses,
you are partners in a partnership, wheth-
er or not you have a formal partnership
agreement. You generally have to file
Form 1065 instead of Schedule C for
your joint business activity; however,
you may not have to file Form 1065 if
either of the following applies.
Form 8990 to determine whether
your business interest deduction is
limited.
•
Form 8995 or 8995-A to claim a
deduction for qualified business income.
•
Single-member limited liability com-
pany (LLC). Generally, a single-mem-
ber domestic LLC is not treated as a sep-
arate entity for federal income tax
purposes. If you are the sole member of
a domestic LLC, file Schedule C (or
Schedule E or F, if applicable) unless
you have elected to treat the domestic
LLC as a corporation. See Form 8832
for details on making this election and
for information about the tax treatment
of a foreign LLC.
You and your spouse elect to be
treated as a qualified joint venture. See
•
You and your spouse wholly own
•
the unincorporated business as commun-
ity property and you treat the business as
a sole proprietorship. See Community
Income, later.
Revoking the election. The election
can be revoked only with the permission
of the IRS. However, the election re-
mains in effect only for as long as you
and your spouse continue to meet the re-
quirements to make the election. If you
and your spouse fail to meet the require-
ments for any year, you will need to
make a new election to be treated as a
qualified joint venture in any future
year.
Otherwise, use Form 1065. See Pub. 541
for information about partnerships.
Single-member LLCs with employees.
A single-member LLC must file em-
ployment tax returns using the LLC's
name and employer identification num-
ber (EIN) rather than the owner's name
and EIN, even if the LLC is not treated
as a separate entity for federal income
tax purposes.
Qualified Joint Venture
You and your spouse can elect to treat an
unincorporated business as a qualified
joint venture instead of a partnership if
you:
C-2
Reportable Transaction
Disclosure Statement
Employer
identification
number
(EIN). You and your spouse do not
need to obtain an EIN to make the elec-
tion. But you may need an EIN to file
other returns, such as employment or ex-
cise tax returns. To apply for an EIN, see
the Instructions for Form SS-4 or go to
Specific
Use Form 8886 to disclose information
for each reportable transaction in which
you participated. Form 8886 must be
filed for each tax year that your federal
income tax liability is affected by your
participation in the transaction. You may
have to pay a penalty if you are required
to file Form 8886 but do not do so. You
may also have to pay interest and penal-
ties on any reportable transaction under-
statements. The following are reportable
transactions.
Instructions
Filers of Form 1041. Do not complete
the block labeled “Social security num-
ber (SSN).” Instead, enter the EIN is-
sued to the estate or trust on line C.
Rental real estate business. If you and
your spouse make the election for your
rental real estate business, you must
each report your share of income and
deductions on Schedule E. Rental real
estate income is not generally included
in net earnings from self-employment
subject to self-employment tax and is
generally subject to the passive loss lim-
itation rules. Electing qualified joint
venture status does not alter the applica-
tion of the self-employment tax or the
passive loss limitation rules.
Line A
Describe the business or professional ac-
tivity that provided your principal
source of income reported on line 1. If
you owned more than one business,
complete a separate Schedule C for each
business. Give the general field or activ-
ity and the type of product or service. If
your general field or activity is whole-
sale or retail trade, or services connected
with production services (mining, con-
struction, or manufacturing), also give
the type of customer or client; for exam-
ple, “wholesale sale of hardware to re-
tailers” or “appraisal of real estate for
lending institutions.”
Any listed transaction that is the
•
same as or substantially similar to tax
avoidance transactions identified by the
IRS.
Any transaction offered to you or a
•
related party under conditions of confi-
dentiality for which you paid an advisor
a fee of at least $50,000.
More information. For more informa-
tion on qualified joint ventures, go to
Certain transactions for which you
•
or a related party have contractual pro-
tection against disallowance of the tax
benefits.
Community Income
Certain transactions resulting in a
•
If you and your spouse wholly own an
unincorporated business as community
property under the community property
laws of a state, foreign country, or U.S.
territory, you can treat your wholly
owned, unincorporated business as a
sole proprietorship, instead of a partner-
ship. Any change in your reporting posi-
tion will be treated as a conversion of
the entity.
Line B
loss of at least $2 million in any single
tax year or $4 million in any combina-
tion of tax years. (At least $50,000 for a
single tax year if the loss arose from a
foreign currency transaction defined in
section 988(c)(1), whether or not the
loss flows through from an S corpora-
tion or partnership.)
Enter on line B the six-digit code from
Activity Codes chart at the end of these
instructions. For nonstore retailers, se-
lect the PBA code by the primary prod-
uct that your establishment sells. For ex-
ample, establishments primarily selling
prescription and non-prescription drugs,
select PBA code 456110 Pharmacies &
drug retailers.
Certain transactions of interest en-
•
tered into that are the same or substan-
tially similar to one of the types of trans-
actions that the IRS has identified by
published guidance as a transaction of
interest.
Report your income and deductions
as follows.
If only one spouse participates in
•
Line D
the business, all of the income from that
business is the self-employment earn-
ings of the spouse who carried on the
business.
Enter on line D the EIN that was issued
to you on Form SS-4. Do not enter your
SSN on this line. Do not enter another
taxpayer's EIN (for example, from any
Forms 1099-MISC that you received). If
you do not have an EIN, leave line D
blank.
See the Instructions for Form 8886
for more details.
If both spouses participate, the in-
•
Capital Construction Fund
come and deductions are allocated to the
spouses based on their distributive
shares.
Do not claim on Schedule C the deduc-
tion for amounts contributed to a capital
construction fund set up under chap-
ter 535 of title 46 of the United States
Code. Instead, reduce the amount you
would otherwise enter on Form 1040 or
1040-SR, line 15, by the amount of the
deduction. Next to line 15, enter “CCF”
and the amount of the deduction. For de-
tails, see Pub. 595.
If either or both spouses are part-
ners in a partnership, see Pub. 541.
•
You need an EIN only if you have a
qualified retirement plan or are required
to file employment, excise, alcohol, to-
bacco, or firearms returns, or are a payer
of gambling winnings. If you need an
EIN, see the Instructions for Form SS-4.
If both spouses elected to treat the
business as a qualifying joint venture,
•
States with community property laws
include Arizona, California, Idaho, Lou-
isiana, Nevada, New Mexico, Texas,
Washington, and Wisconsin. See Pub.
555 for more information about com-
munity property laws.
Single-member LLCs. If you are the
sole owner of an LLC that is not treated
as a separate entity for federal income
tax purposes, enter on line D the EIN
that was issued to the LLC (in the LLC's
Additional Information
small businesses.
C-3
legal name) for a qualified retirement
plan, to file employment, excise, alco-
hol, tobacco, or firearms returns, or as a
payer of gambling winnings. If you do
not have such an EIN, leave line D
blank.
Example. You change to the cash
method of accounting and choose to ac-
count for inventoriable items in the same
manner as non-incidental materials and
supplies for the 2023 tax year. You ac-
crued sales in 2022 for which you re-
ceived payment in 2023. You must re-
port those sales in both years as a result
of changing your accounting method
and must make a section 481(a) adjust-
ment to prevent duplication of income.
that an owner would not customarily do
in the same type of activity and one of
your main reasons for doing the work
was to avoid the disallowance of losses
or credits from the activity under the
passive activity rules.
Work you did as an investor in an ac-
tivity is not treated as participation un-
less you were directly involved in the
day-to-day management or operations of
the activity. Work performed as an in-
vestor includes:
Line E
Enter your business address. Show a
street address instead of a box number.
Include the suite or room number, if any.
If you conducted the business from your
home located at the address shown on
page 1 of your tax return, you do not
have to complete this line.
A net negative section 481 adjust-
ment is generally taken into account in
the year of change. A net positive sec-
tion 481(a) adjustment is generally taken
into account over a period of 4 years. In-
clude any net positive section 481(a) ad-
justments on line 6. If the net section
481(a) adjustment is negative, report it
in Part V.
Studying and reviewing financial
statements or reports on the activity,
•
Preparing or compiling summaries
or analyses of the finances or operations
of the activity for your own use, and
•
Line F
Monitoring the finances or opera-
tions of the activity in a nonmanagerial
capacity.
•
Generally, you can use the cash method,
an accrual method, or any other method
permitted by the Internal Revenue Code.
In all cases, the method used must clear-
ly reflect income. Unless you are a small
business taxpayer (defined later under
Part III), you must use an accrual meth-
od for sales and purchases of inventory
items. Special rules apply to long-term
contracts (see section 460 for details).
See also Rev. Proc. 2022-9 for changes
in accounting periods and methods of
accounting, available at IRS.gov/irb/
More information. For more informa-
tion about changing your accounting
method and the section 481(a) adjust-
ment, see the Instructions for Form
3115. Additional information is also
available in various revenue procedures.
See Rev. Proc. 2022-14 (and any subse-
quent revenue procedures modifying
Rev. Proc. 2022-14) for a list of auto-
matic changes, including a description
of its effect on prior lists of automatic
changes. Rev. Proc. 2022-14 is available
Participation by your spouse during
the tax year in an activity in which you
own an interest can be counted as your
participation in the activity. This rule ap-
plies even if your spouse did not own an
interest in the activity and whether or
not you and your spouse file a joint re-
turn. However, this rule does not apply
for purposes of determining whether you
and your spouse can elect to have your
business treated as a qualified joint ven-
ture instead of a partnership (see Quali-
at
If you use the cash method, show all
items of taxable income actually or con-
structively received during the year (in
cash, property, or services). Income is
constructively received when it is credi-
ted to your account or set aside for you
to use. Also, show amounts actually paid
during the year for deductible expenses.
However, if the payment of an expendi-
ture creates an asset having a useful life
that extends beyond 12 months or the
end of the next tax year, it may not be
deductible or may be deductible only in
part for the year of the payment. See
Small Business.
For purposes of the passive activity
rules, you materially participated in the
operation of a trade or business activity
during 2023 if you met any of the fol-
lowing seven tests.
Line G
If your business activity is not a rental
activity and you meet any of the materi-
al participation tests, explained next, or
check the “Yes” box. Otherwise, check
“No.” If you check “No,” this activity is
passive. If you have a loss from a pas-
you have a profit from the rental of
property to a nonpassive activity, see
Recharacterization of Passive Income in
Pub. 925 to find out how to report the
net income.
1. You participated in the activity
for more than 500 hours during the tax
year.
2. Your participation in the activity
for the tax year was substantially all of
the participation in the activity of all in-
dividuals (including individuals who did
not own any interest in the activity) for
the tax year.
3. You participated in the activity
for more than 100 hours during the tax
year, and you participated at least as
much as any other person for the tax
year. This includes individuals who did
not own any interest in the activity.
For amounts includible in income and
deductible as expense under an accrual
method, see Pub. 538.
Material participation. For purposes
of the seven material participation tests
listed later, participation generally in-
cludes any work you did in connection
with an activity, if you owned an interest
in the activity at the time you did the
work. The capacity in which you did the
work does not matter. However, work is
not treated as participation if it is work
To change your accounting method,
you must generally file Form 3115. You
may also have to make an adjustment to
prevent amounts of income or expense
from being duplicated or omitted. This
is called a section 481(a) adjustment.
4. The activity is a significant par-
ticipation activity for the tax year, and
you participated in all significant partici-
pation activities for more than 500 hours
during the year. An activity is a “signifi-
C-4
cant participation activity” if it involves
the conduct of a trade or business, you
participated in the activity for more than
100 hours during the tax year, and you
did not materially participate under any
of the material participation tests (other
than this test 4).
“No” box on line G. In addition, your
rental activity loss may be limited even
if you materially participated. In gener-
al, a business activity in which you do
not materially participate or a rental ac-
tivity is a passive activity and you have
to use Form 8582 to apply a limitation
that may reduce the loss, if any, that you
may enter on Schedule C, line 31. For
details, see Pub. 925.
figure the extraterritorial income exclu-
sion. Report it on Schedule C as ex-
plained in the Instructions for Form
8873.
If you were a debtor in a chapter 11
bankruptcy case during 2023, see Chap-
ter 11 Bankruptcy Cases in the Instruc-
tions for Form 1040 (under Income) and
the Instructions for Schedule SE.
5. You materially participated in the
activity for any 5 of the prior 10 tax
years.
Be sure to report all income attributa-
ble to your trade or business from all
sources. You may receive one or more
Forms 1099 from people who are re-
quired to provide information to the IRS
listing amounts that may be income you
received as a result of your trade or busi-
ness activities. The following is a list of
some of the common Forms 1099.
6. The activity is a personal service
activity in which you materially partici-
pated for any 3 prior tax years. A per-
sonal service activity is an activity that
involves performing personal services in
the field of health, law, engineering, ar-
chitecture, accounting, actuarial science,
performing arts, or consulting, or any
other trade or business in which capital
is not a material income-producing fac-
tor.
Note. Line G doesn't apply to filers of
Form 1040-SS.
Line H
If you started or acquired this business
in 2023, check the box on line H. Also,
check the box if you are reopening or re-
starting this business after temporarily
closing it, and you did not file a 2022
Schedule C for this business.
1099-MISC. For more information
•
about what is reported on Form
1099-MISC, see the Instructions for Re-
cipient included on that form.
7. Based on all the facts and circum-
stances, you participated in the activity
on a regular, continuous, and substantial
basis for more than 100 hours during the
tax year. Your participation in managing
the activity does not count in determin-
ing if you meet this test if any person
(except you) (a) received compensation
for performing management services in
connection with the activity, or (b) spent
more hours during the tax year than you
spent performing management services
in connection with the activity (regard-
less of whether the person was compen-
sated for the services).
Line I
1099-NEC. For more information
•
If you made any payment in 2023 that
would require you to file any Forms
1099, check the “Yes” box. Otherwise,
check the “No” box.
about what is reported on Form
1099-NEC, see the Instructions for Re-
cipient included on that form.
1099-K. For more information
•
about what is reported on Form 1099-K,
see the Instructions for Payee included
You may have to file information re-
turns for wages paid to employees, cer-
tain payments of fees and other nonem-
ployee compensation, interest, rents,
royalties, real estate transactions, annui-
ties, and pensions. You may also have to
file an information return if you sold
$5,000 or more of consumer products to
a person on a buy-sell, a deposit-com-
mission, or other similar basis for resale.
Income you report on Sched-
ule C may be qualified business
income and entitle you to a de-
TIP
duction on Form 1040 or 1040-SR,
line 13. See Forms 8995 and 8995-A,
and
Rental of personal property. General-
ly, a rental activity (such as long-term
equipment leasing) is a passive activity
even if you materially participated in the
activity. However, if you met any of the
five exceptions listed under Rental Ac-
tivities in the Instructions for Form
8582, the rental of the property is not
treated as a rental activity and the mate-
rial participation rules explained earlier
apply.
Note. Line I doesn't apply to filers of
Form 1040-SS.
Line 1
The Guide to Information Re-
Enter gross receipts from your trade or
business. Be sure to check any Forms
1099 you received for business income
that must be reported on this line.
turns in the 2023 General In-
structions for Certain Informa-
TIP
tion Returns identifies which Forms
1099 must be filed, the amounts to re-
port, and the due dates for the required
Forms 1099.
If you received one or more Forms
1099-NEC, be sure line 1 includes
amounts properly shown on your Forms
1099-NEC. If the total amounts that
were reported in box 1 of Forms
1099-NEC are more than the total you
are reporting on line 1, attach a state-
ment explaining the difference.
Exception for oil and gas. If you are
filing Schedule C to report income and
deductions from an oil or gas well in
which you own a working interest di-
rectly or through an entity that does not
limit your liability, check the “Yes” box.
The activity of owning a working inter-
est is not a passive activity, regardless of
your participation.
Part I. Income
Except as otherwise provided in the In-
ternal Revenue Code, gross income in-
cludes income from whatever source de-
rived. In certain circumstances, howev-
er, gross income does not include extra-
territorial income that is qualifying for-
eign trade income. Use Form 8873 to
Statutory employees. If you received a
Form W-2, Wage and Tax Statement,
and the "Statutory employee" box in
box 13 of that form was checked, report
your income and expenses related to that
Limit on losses. Your business activity
loss may be limited if you checked the
C-5
income on Schedule C. Enter your statu-
tory employee income from box 1 of
Form W-2 on line 1 of Schedule C and
check the box on that line. Social securi-
ty and Medicare tax should have been
withheld from your earnings; as a result,
you do not owe self-employment tax on
these earnings. Statutory employees in-
clude full-time life insurance agents,
certain agent or commission drivers and
traveling salespersons, and certain
homeworkers.
A sales allowance is a reduction in the
selling price of products, instead of a
cash or credit refund.
941 or Form 944 for 2023 for the
nonrefundable and refundable portions
of this credit that you claimed against
your employment taxes.
Other kinds of miscellaneous
business income.
•
Line 6
Report on line 6 business income not re-
ported elsewhere in Part I. Be sure to in-
clude amounts from the following.
If the business use percentage of any
later) dropped to 50% or less in 2023,
report on this line any recapture of ex-
cess depreciation, including any section
179 expense deduction. Use Part IV of
Form 4797 to figure the recapture. Also,
if the business use percentage drops to
50% or less on leased listed property
(other than a vehicle), include on this
line any inclusion amount. See chapter 5
of Pub. 946 to figure the amount.
Finance reserve income.
Scrap sales.
Bad debts you recovered.
Interest (such as on notes and
•
•
•
•
If you had both self-employment in-
come and statutory employee income,
you must file two Schedules C. You can-
not combine these amounts on a single
Schedule C.
accounts receivable).
State gasoline or fuel tax refunds
you received in 2023.
•
Any amount of credit for biofuel
claimed on line 3 of Form 6478.
•
Any amount of credit for biodiesel,
•
Note. Statutory employees informa-
tion doesn’t apply to Form 1040-SS fil-
ers.
renewable diesel, and sustainable
aviation fuel claimed on line 11 of Form
8864.
Part II. Expenses
Qualified joint ventures should
Credit for federal tax paid on fuels
claimed on your 2022 Form 1040 or
1040-SR.
•
report rental real estate income
not subject to self-employment
tax on Schedule E. See Qualified Joint
Schedule E.
!
Capitalizing costs of producing prop-
erty and acquiring property for re-
sale. If you produced real or tangible
personal property or acquired real or
personal property for resale, you must
generally capitalize certain expenses in
inventory or other property. These ex-
penses include the direct costs of the
property and any indirect costs properly
allocable to that property. Reduce the
amounts on lines 8 through 26, 27b, and
Part V by amounts capitalized. See Pub.
538 for a discussion of the uniform capi-
talization rules.
CAUTION
Prizes and awards related to your
trade or business.
•
Amounts you received in your
trade or business as shown on Form
1099-PATR.
•
Installment sales. Generally, the in-
stallment method cannot be used to re-
port income from the sale of (a) personal
property regularly sold under the install-
ment method, or (b) real property held
for resale to customers. But the install-
ment method can be used to report in-
come from sales of certain residential
lots and timeshares if you elect to pay
interest on the tax due on that income af-
ter the year of sale. See section 453(l)(2)
(B) for details. If you make this election,
include the interest in the total on
Schedule 2 (Form 1040), line 14, and
enter the amount of interest and “453(l)
(3)” on the line next to the entry space.
The amount of any payroll tax
•
credit taken by an employer for qualified
paid sick leave and qualified paid family
leave under the Families First
Coronavirus Response Act (FFCRA),
and the American Rescue Plan Act of
2021 (ARP). See Form 941, lines 11b,
11d, 13c, and 13e, and Form 944, lines
8b, 8d, 10d, and 10f. You must include
the full amount (both the refundable and
nonrefundable portions) of the credit for
qualified sick and family leave wages in
gross income for the tax year that
includes the last day of any calendar
quarter with respect to which a credit is
allowed.
Exception for a small business tax-
fined later under Part III) is not required
to capitalize certain expenses to invento-
ry or other property. See Pub. 538 for
more details.
Exception for creative property. If
you are a freelance artist, author, or pho-
tographer, you may be exempt from the
capitalization rules. However, your per-
sonal efforts must have created (or rea-
sonably be expected to create) the prop-
erty. This exception does not apply to
any expense related to printing, photo-
graphic plates, motion picture films, vid-
eotapes, or similar items. These expen-
ses are subject to the capitalization rules.
For details, see Uniform Capitalization
Rules in Pub. 538.
If you use the installment method, at-
tach a statement to your return. Show
separately for 2023 and the 3 preceding
years: gross sales, cost of goods sold,
gross profit, percentage of gross profit to
gross sales, amounts collected, and gross
profit on amounts collected.
Note. A credit is available only if the
leave was taken after March 31, 2020,
and before October 1, 2021, and only af-
ter the qualified leave wages were paid,
which might under certain circumstan-
ces not occur until a quarter after Sep-
tember 30, 2021, including quarters dur-
ing 2023. Accordingly, all lines related
to qualified sick and family leave wages
remain on the employment tax returns
for 2023.
Line 2
Report your sales returns and allowan-
ces as a positive number on line 2. A
sales return is a cash or credit refund
you gave to customers who returned de-
fective, damaged, or unwanted products.
Any amount of credit for COBRA
premium assistance. See your Form(s)
•
C-6
later).
Line 9
Line 13
You can deduct the actual expenses of
operating your car or truck or take the
standard mileage rate. This is true even
if you used your vehicle for hire (such as
a taxicab). You must use actual expenses
if you used five or more vehicles simul-
taneously in your business (such as in
fleet operations). You can’t use actual
expenses for a leased vehicle if you pre-
viously used the standard mileage rate
for that vehicle.
Depreciation and section 179 expense
deduction. Depreciation is the annual
deduction allowed to recover the cost or
other basis of business or investment
property having a useful life substantial-
ly beyond the tax year. You can also de-
preciate improvements made to leased
business property. However, stock in
trade, inventories, and land are not de-
preciable. Depreciation starts when you
first use the property in your business or
for the production of income. It ends
when you take the property out of serv-
ice, deduct all your depreciable cost or
other basis, or no longer use the property
in your business or for the production of
income. You can also elect under section
179 to expense part or all of the cost of
certain property you bought in 2023 for
use in your business. See the Instruc-
tions for Form 4562 and Pub. 946 to fig-
ure the amount to enter on line 13.
Line 10
Enter the total commissions and fees for
the tax year. Do not include commis-
sions or fees that are capitalized or de-
ducted elsewhere on your return.
You must file Form 1099-NEC to re-
port certain commissions and fees of
$600 or more during the year. See the
Instructions for Forms 1099-MISC and
1099-NEC for details.
You can take the standard mileage
rate for 2023 only if you:
Sales of property. Generally, commis-
sions and other fees paid to facilitate the
sale of property must be capitalized.
However, if you are a dealer in property,
enter on line 10 the commissions and
fees you paid to facilitate the sale of that
property.
Owned the vehicle and used the
standard mileage rate for the first year
you placed the vehicle in service, or
•
Leased the vehicle and are using
the standard mileage rate for the entire
lease period.
•
Note. A dealer in property is a person
who regularly sells property in the ordi-
nary course of their trade or business.
If you take the standard mileage rate:
Multiply the number of business
•
miles driven by 0.655. For example,
1,250 business miles driven × 0.655 =
$818.75.
For more information on the capitali-
zation of commissions and fees, see the
examples under Regulations section
1.263(a)-1(e).
When to attach Form 4562. You must
complete and attach Form 4562 only if
you are claiming:
Add to this amount your parking
fees and tolls; and
•
Depreciation on property placed in
service during 2023;
•
Enter the total on line 9. Do not
•
Depreciation on listed property
(defined later), regardless of the date it
was placed in service; or
Line 11
•
deduct depreciation, rent or lease pay-
ments, or your actual operating expen-
ses.
Enter the total cost of contract labor for
the tax year. Contract labor includes
payments to persons you do not treat as
employees (for example, independent
contractors) for services performed for
your trade or business. Do not include
contract labor deducted elsewhere on
your return, such as contract labor in-
cludible on line 17, 21, 26, or 37. Also,
do not include salaries and wages paid
later.
A section 179 expense deduction.
•
If you deduct actual expenses:
If you acquired depreciable property
for the first time in 2023, see Pub. 946.
Include on line 9 the business por-
tion of expenses for gasoline, oil, re-
pairs, insurance, license plates, etc.; and
•
Listed property. Listed property gener-
ally includes but is not limited to:
Show depreciation on line 13 and
rent or lease payments on line 20a.
•
Passenger automobiles weighing
6,000 pounds or less;
•
For details, see chapter 4 of Pub. 463.
Any other property used for trans-
•
portation if the nature of the property
lends itself to personal use, such as mo-
torcycles, pickup trucks, etc.; and
Information on your vehicle. If you
claim any car and truck expenses, you
must provide certain information on the
use of your vehicle by completing one
of the following.
You must file Form 1099-NEC to re-
port contract labor payments of $600 or
more during the year. See the Instruc-
tions for Forms 1099-MISC and
1099-NEC for details.
Any property used for entertain-
•
ment or recreational purposes (such as
photographic, phonographic, communi-
cation, and video recording equipment).
1. Complete Schedule C, Part IV, if
(a) you are claiming the standard mile-
age rate, you lease your vehicle, or your
vehicle is fully depreciated; and (b) you
are not required to file Form 4562 for
any other reason. If you used more than
one vehicle during the year, attach a
statement with the information requested
in Schedule C, Part IV, for each addi-
tional vehicle.
Exception. Listed property does not
include photographic, phonographic,
communication, or video equipment
used exclusively in your trade or busi-
ness or at your regular business estab-
lishment. For purposes of this exception,
a portion of your home is treated as a
regular business establishment only if
that portion meets the requirements un-
der section 280A(c)(1) for deducting ex-
Line 12
Enter your deduction for depletion on
this line. If you have timber depletion,
attach Form T (Timber). See chapter 7
Depletion is generally an item
of tax preference under the Al-
ternative Minimum Tax (AMT).
See section 57.
!
2. Complete Form 4562, Part V, if
you are claiming depreciation on your
vehicle or you are required to file Form
CAUTION
C-7
penses for the business use of your
home.
ing on its type. For example, home
mortgage interest and investment inter-
est are treated differently. “Interest allo-
cation” rules require you to allocate
(classify) your interest expense so it is
deducted (or capitalized) on the correct
line of your return and receives the right
tax treatment. These rules could affect
how much interest you are allowed to
deduct on Schedule C.
The Tax Cuts and Jobs Act, sec-
tion 11043, limited the deduc-
tion for mortgage interest paid
!
CAUTION
business use percentage of any listed
property dropped to 50% or less in 2023.
on home equity loans and lines of credit.
See section 163(h)(3)(F).
If you and at least one other person
(other than your spouse if you file a joint
return) were liable for and paid interest
on the mortgage and the other person re-
ceived the Form 1098, include your
share of the interest on line 16b. Attach
a statement to your return showing the
name and address of the person who re-
ceived the Form 1098. In the margin
next to line 16b, enter “See attached.”
Line 14
Deduct contributions to employee bene-
fit programs that are not an incidental
part of a pension or profit-sharing plan
included on line 19. Examples are acci-
dent and health plans, group-term life
insurance, and dependent care assistance
programs. If you made contributions on
your behalf as a self-employed person to
a dependent care assistance program,
complete Form 2441, Parts I and III, to
figure your deductible contributions to
that program.
Generally, you allocate interest ex-
pense by tracing how the proceeds of the
loan were used. See chapter 4 of Pub.
225, generally, for details.
Limitation on business interest. You
must file Form 8990 to deduct any inter-
est expenses of this trade or business un-
less you are a small business taxpayer
(defined under Part III) or meet one of
the other filing exceptions listed in the
Instructions for Form 8990.
If you paid interest in 2023 that also
applies to future years, deduct only the
part that applies to 2023.
Line 17
You cannot deduct contributions you
made on your behalf as a self-employed
person for group-term life insurance.
Include on this line fees charged by ac-
countants and attorneys that are ordinary
and necessary expenses directly related
to operating your business.
If you must file Form 8990, figure
the limit on your business interest ex-
penses on Form 8990 before completing
lines 16a and 16b. Follow the instruc-
port the reduced interest on lines 16a
and 16b. The interest you can't deduct
this year will carry forward to next year
on Form 8990.
Do not include on line 14 any contri-
butions you made on your behalf as a
self-employed person to an accident and
health plan. However, you may be able
to deduct on Schedule 1 (Form 1040),
line 17, the amount you paid for health
insurance on behalf of yourself, your
spouse, and dependents, even if you do
not itemize your deductions. See the in-
structions for line 17, Schedule 1, con-
tained within the Instructions for Form
1040.
Include fees for tax advice related to
your business and for preparation of the
tax forms related to your business. Also,
include expenses incurred in resolving
asserted tax deficiencies related to your
business.
If you are a small business taxpayer
or meet one of the other filing excep-
tions for Form 8990, follow the instruc-
port all of your deductible interest on
lines 16a and 16b.
Line 18
Include on this line your expenses for
office supplies and postage.
You must reduce your line 14 deduc-
tion by the amount of any credit for
small employer health insurance premi-
ums determined on Form 8941. See
Form 8941 and its instructions to deter-
mine which expenses are eligible for the
credit.
How to report. If you have a mortgage
on real property used in your business,
enter on line 16a the interest you paid
for 2023 to banks or other financial in-
stitutions for which you received a Form
1098 (or similar statement). If you did
not receive a Form 1098, enter the inter-
est on line 16b.
Line 19
Enter your deduction for the contribu-
tions you made for the benefit of your
employees to a pension, profit-sharing,
or annuity plan (including SEP, SIM-
PLE, and SARSEP plans described in
Pub. 560). If the plan included you as a
self-employed person, enter the contri-
butions made as an employer on your
behalf on Schedule 1 (Form 1040),
line 16, not on Schedule C.
Line 15
If you paid more mortgage interest
than is shown on Form 1098, include the
amount on line 16a. Attach a statement
to your return explaining the difference
and enter “See attached” in the margin
next to line 16a. Don’t include mortgage
interest that must be capitalized, for ex-
der Uniform Capitalization Rules, for
details.
Deduct premiums paid for business in-
surance on line 15. Deduct on line 14
amounts paid for employee accident and
health insurance. Do not deduct amounts
credited to a reserve for self-insurance
or premiums paid for a policy that pays
for your lost earnings due to sickness or
chapter 8.
This deduction may be subject to lim-
itations. For more information on poten-
tial limitations, see Pub. 560.
In most cases, you must file the ap-
plicable form listed below if you main-
tain a pension, profit-sharing, or other
funded-deferred compensation plan. The
filing requirement is not affected by
Lines 16a and 16b
Interest allocation rules. The tax treat-
ment of interest expense differs depend-
C-8
whether or not the plan qualified under
the Internal Revenue Code, or whether
or not you claim a deduction for the cur-
rent tax year. There is a penalty for fail-
ure to timely file these forms.
You can also deduct the cost of
books, professional instruments, equip-
ment, etc., if you normally use them
within a year. However, if their useful-
ness extends substantially beyond a
year, you must generally recover their
costs through depreciation.
governments. These taxes are not inclu-
ded in gross receipts or sales nor are
they a deductible expense. However, if
the state or local government allowed
you to retain any part of the sales tax
you collected, you must include that
amount as income on line 6.
Form 5500-EZ. File this form if you
have a one-participant retirement plan
Other taxes and license fees not re-
lated to your business.
•
that meets certain requirements.
A
one-participant plan is a plan that covers
only you (or you and your spouse).
Line 23
Do not reduce your deduction
You can deduct the following taxes and
licenses on this line.
for social security and Medi-
care taxes by the nonrefundable
Form 5500-SF. File this form electroni-
cally with the Department of Labor (at
efast.dol.gov) if you have a small plan
(fewer than 100 participants in most ca-
ses) that meets certain requirements.
!
CAUTION
State and local sales taxes imposed
•
and refundable portions of the credit for
sick and family leave wages that you
claimed on Form 944 or Form(s) 941.
Instead, you must report your credit for
qualified sick and family leave wages as
income on line 6.
on you as the seller of goods or services.
If you collected this tax from the buyer,
you must also include the amount col-
lected in gross receipts or sales on
line 1.
Form 5500. File this form electronical-
ly with the Department of Labor (at
efast.dol.gov) for a plan that does not
meet the requirements for filing Form
5500-EZ or Form 5500-SF.
Real estate and personal property
taxes on business assets.
•
Licenses and regulatory fees for
•
your trade or business paid each year to
state or local governments. But some li-
censes, such as liquor licenses, may
have to be amortized. See the Instruc-
tions for Form 4562, Depreciation and
Amortization, for more information on
amortization.
Line 24a
For details, see Pub. 560.
Enter your expenses for lodging and
transportation connected with overnight
travel for business while away from
your tax home. In most cases, your tax
home is your main place of business, re-
gardless of where you maintain your
family home. You can’t deduct expenses
paid or incurred in connection with em-
ployment away from home if that period
of employment exceeds 1 year. Also,
you cannot deduct travel expenses for
your spouse, your dependent, or any oth-
er individual unless that person is your
employee, the travel is for a bona fide
business purpose, and the expenses
would otherwise be deductible by that
person.
Lines 20a and 20b
If you rented or leased vehicles, machi-
nery, or equipment, enter on line 20a the
business portion of your rental cost. But
if you leased a vehicle for a term of 30
days or more, you may have to reduce
your deduction by the inclusion amount.
See Leasing a Car in chapter 4 of Pub.
463 to figure this amount.
Social security and Medicare taxes
•
paid to match required withholding from
your employees’ wages. Reduce your
deduction by the amount shown on
Form 8846, line 4.
Federal unemployment tax paid.
Federal highway use tax.
Contributions to a state unemploy-
•
•
Enter on line 20b amounts paid to
rent or lease other property, such as of-
fice space in a building.
•
ment insurance fund or disability benefit
fund if they are considered taxes under
state law.
Line 21
Do not deduct the following.
Deduct the cost of incidental repairs and
maintenance that do not add to the prop-
erty's value or appreciably prolong its
life. Do not deduct the value of your
own labor. Do not deduct amounts spent
to restore or replace property; they must
be capitalized.
Do not include expenses for meals on
not include entertainment expenses on
this line.
Federal income taxes, including
•
your self-employment tax. However,
you can deduct one-half of your self-em-
ployment tax on Schedule 1 (Form
1040), line 15 (but if filing Form
1040-NR, then only when covered under
the U.S. social security system due to an
international social security agreement).
Instead of keeping records of your
actual incidental expenses, you can use
an optional method for deducting inci-
dental expenses only if you did not pay
or incur meal expenses on a day you
were traveling away from your tax
home. The amount of the deduction is
$5 a day. Incidental expenses include
fees and tips given to porters, baggage
carriers, bellhops, hotel maids, stewards
or stewardesses and others on ships, and
hotel servants in foreign countries. They
do not include expenses for laundry,
cleaning and pressing of clothing, lodg-
ing taxes, or the costs of telegrams or
telephone calls. You cannot use this
Line 22
Estate and gift taxes.
Taxes assessed to pay for improve-
ments, such as paving and sewers.
•
In most cases, you can deduct the cost of
materials and supplies only to the extent
you actually consumed and used them in
your business during the tax year (unless
you deducted them in a prior tax year).
However, if you had incidental materials
and supplies on hand for which you kept
no inventories or records of use, you can
deduct the cost of those you actually
purchased during the tax year, provided
that method clearly reflects income.
•
Taxes on your home or personal
use property.
•
State and local sales taxes on prop-
•
erty purchased for use in your business.
Instead, treat these taxes as part of the
cost of the property.
State and local sales taxes imposed
on the buyer that you were required to
collect and pay over to state or local
•
C-9
method on any day that you use the
standard meal allowance (as explained
under Line 24b, later).
See Notice 2021-25 for examples and
more information. Notice 2021-25 is
incidentals provided to a nonemployee
to the extent the expenses are includible
in the gross income of that person and
reported on Form 1099-NEC. See chap-
ter 5 of Pub. 15 (Circular E), Employer’s
Tax Guide, for details and other excep-
available
at
You can’t deduct expenses for attend-
ing a convention, seminar, or similar
meeting held outside the North Ameri-
can area unless the meeting is directly
related to your trade or business and it is
as reasonable for the meeting to be held
outside the North American area as
within it. These rules apply to both em-
ployers and employees. Other rules ap-
ply to luxury water travel.
Standard meal allowance. Instead of
deducting the actual cost of your meals
while traveling away from home, you
can use the standard meal allowance for
your daily meals and incidental expen-
ses. Under this method, you deduct a
specified amount, depending on where
you travel, instead of keeping records of
your actual meal expenses. However,
you must still keep records to prove the
time, place, and business purpose of
your travel.
Daycare providers. If you qualify as a
family daycare provider, you can use the
standard meal and snack rates, instead of
actual costs, to figure the deductible cost
of meals and snacks provided to eligible
children. If you receive reimbursement
under a food program of the Department
of Agriculture, only deduct the cost of
food that exceeds reimbursement, if any.
See Pub. 587 for details, including re-
cordkeeping requirements.
For details on travel expenses, see
chapter 1 of Pub. 463.
The standard meal allowance is the
federal meals and incidental expenses
(M&IE) rate. You can find these rates
for locations inside and outside the con-
tinental United States by going to the
General Services Administration's web-
site at GSA.gov/travel/plan-book/per-
Line 24b
Enter your deductible business meal ex-
penses. This includes expenses for meals
while traveling away from home for
business. Your deductible business meal
expenses are a percentage of your actual
business meal expenses or standard meal
later, for the percentage that applies to
your actual meal expenses or standard
meal allowance. In most cases, the per-
centage is 50%.
Line 25
Deduct utility expenses only for your
trade or business.
Local telephone service. If you used
your home phone for business, do not
deduct the base rate (including taxes) of
the first phone line into your residence.
But you can deduct any additional costs
you incurred for business that are more
than the base rate of the first phone line.
For example, if you had a second line,
you can deduct the business percentage
of the charges for that line, including the
base rate charges.
See chapter 2 of Pub. 463 for details
on how to figure your deduction using
the standard meal allowance, including
special rules for partial days of travel.
For special per diem rates and rules of
high cost locales, see IRS.gov/irb/
Do not include entertainment expen-
ses on this line.
Amount of deduction. For business
meals, you can deduct 50% of your busi-
ness meal expenses, including meals in-
curred while away from home on busi-
ness. However, for individuals subject to
the Department of Transportation (DOT)
hours of service limits, the percentage
for other business meals is increased to
80% for business meals consumed dur-
ing, or incident to, any period of duty for
which those limits are in effect. Individ-
uals subject to the DOT hours of service
limits include the following.
Business meal expenses. You can de-
duct a percentage of the actual cost of a
meal if the following conditions are met.
Line 26
The meal expense was an ordinary
and necessary expense in carrying on
your trade or business.
•
Enter the total salaries and wages for the
tax year reduced by the amount of the
following credit(s), if applicable.
The expense was not lavish or ex-
travagant under the circumstances.
•
Work Opportunity Credit (Form
5884).
•
You or your employee was present
at the meal.
•
Empowerment Zone Employment
Credit (Form 8844).
•
The meal was provided to a cur-
•
Credit for Employer Differential
Wage Payments (Form 8932).
•
rent or potential business customer, cli-
ent, consultant, or similar business con-
tact.
Certain air transportation workers
•
Employer Credit for Paid Family
and Medical Leave (Form 8994).
•
(such as pilots, crew, dispatchers, me-
chanics, and control tower operators)
who are under Federal Aviation Admin-
istration regulations.
In the case of food or beverages
•
provided during or at an entertainment
event, the food and beverages were pur-
chased separately from the entertain-
ment, or the cost of the food and bever-
ages was stated separately from the cost
of the entertainment on one or more
bills, invoices, or receipts.
Do not reduce your deduction for any
portion of a credit that was passed
through to you from a pass-through enti-
ty. See the instructions for the credit
form for more information.
Interstate truck operators who are
under DOT regulations.
•
Certain merchant mariners who are
under Coast Guard regulations.
•
Do not include salaries and wages de-
ducted elsewhere on your return or
amounts paid to yourself.
However, you can fully deduct meals
and incidentals furnished or reimbursed
to an employee if you properly treat the
expense as wages subject to withhold-
ing. You can also fully deduct meals and
You cannot avoid the entertain-
ment disallowance rule by in-
flating the amount charged for
food and beverages.
!
CAUTION
C-10
If you provided taxable fringe
benefits to your employees,
such as personal use of a car,
ularly for daycare, or regularly for stor-
age of inventory or product samples, by
$5. The area you use to figure your de-
duction cannot exceed 300 square feet.
You cannot use the simplified method to
figure a deduction for rental use of your
home.
tion for any additional home. If one or
more of the homes were not used for the
entire year (for example, you moved
during the year), see Part-year use or
Instructions for Form 8829.
!
CAUTION
do not deduct as wages the amount ap-
plicable to depreciation and other ex-
penses claimed elsewhere.
In most cases, you are required to file
Form W-2 for each employee. See the
General Instructions for Forms W-2 and
W-3.
Electing to use the simplified meth-
od. You choose whether or not to use
the simplified method each tax year.
Make the election by using the simpli-
fied method to figure the deduction for
the qualified business use of a home on
a timely filed, original federal income
tax return for that year. An election for a
year, once made, is irrevocable. A
change from using the simplified meth-
od in one year to actual expenses in a
succeeding year, or vice versa, is not a
change in method of accounting and
does not require the consent of the Com-
missioner.
Other requirements must still be
met. You must still meet all the use re-
quirements to claim a deduction for
business use of the home. The simplified
method is only an alternative to the cal-
culation, allocation, and substantiation
of actual expenses. The simplified meth-
od is not an alternative to the exclusivity
and other tests that must be met in order
to qualify for this deduction. For more
information about qualifying business
uses, see Qualifying for a Deduction in
Pub. 587.
Line 27b
Energy efficient commercial buildings
deduction. You may be able to deduct
part or all of the expenses of modifying
an existing commercial building to make
it energy efficient. For details, see Form
7205 and its instructions. Attach Form
7205 to your tax return.
Gross
income
limitation. The
amount of your deduction is still limited
to the gross income derived from quali-
fied business use of the home reduced
by the business deductions that are not
related to your use of the home. If this
limitation reduces the amount of your
deduction, you cannot carry over the dif-
ference to another tax year.
Line 30
If you share your home with someone
else who uses the home for a separate
business that qualifies for this deduction,
each of you may make your own elec-
tion, but not for the same portion of the
home.
Business use of your home. You may
be able to deduct certain expenses for
business use of your home, subject to
limitations. To claim a deduction for
business use of your home, use Form
8829, or you can elect to determine the
amount of the deduction using a simpli-
fied method.
If you conduct more than one busi-
ness that qualifies for this deduction in
your home, your election to use the sim-
plified method applies to all your quali-
fied business uses of your home. You are
limited to a maximum of 300 square feet
for all of the businesses you conduct in
your home that qualify for this deduc-
tion. Allocate the actual square footage
used (up to the maximum 300 square
feet) among your qualified business uses
in any reasonable manner you choose,
but you may not allocate more square
feet to a qualified business use than you
actually use in that business.
Carryover of actual expenses from
Form 8829. If you used Form 8829 in a
prior year, and you had actual expenses
that you could carry over to the next
year, you cannot claim those expenses if
you are using the simplified method. In-
stead, the actual expenses from Form
8829 that were not allowed will be car-
ried over to the next year that you use
actual expenses to figure your deduc-
tion.
If you have a business use of another
home, you can’t use the simplified meth-
od for that home. You can use the Form
8829 to claim expenses for business use
of the other home.
For additional information about
claiming this deduction, see Pub. 587.
Note. Line 30 doesn't apply to filers of
Form 1040-SS.
Depreciation of home. You cannot
deduct any depreciation (including any
additional first-year depreciation) or sec-
tion 179 expense for the portion of your
home that is used in a qualified business
use if you figure the deduction for the
business use of your home using the
simplified method. The depreciation de-
duction allowable for that portion of the
home for that year is deemed to be zero.
If you are not using the simpli-
fied method to determine the
amount of expenses you may
TIP
If you used your home for more
deduct for business use of a home, do
not complete the additional entry spaces
on line 30 for total square footage of
your home and of the part of the home
used for business. Instead, include the
amount from line 36 of your Form 8829
on line 30.
than one business, you will
need to file a separate Sched-
ule C for each business. Do not combine
your deductions for each business use
on a single Schedule C.
!
CAUTION
Business use of more than one
home. You may have used more than
one home in your business. If you used
more than one home for the same busi-
ness during 2023, you may elect to use
the simplified method for only one
home; you must file a Form 8829 to
claim a business use of the home deduc-
Simplified method. The simplified
method is an alternative to the calcula-
tion, allocation, and substantiation of ac-
tual expenses. In most cases, you will
figure your deduction by multiplying the
area (measured in square feet) used reg-
ularly and exclusively for business, reg-
C-11
Keep for Your Records
Simplified Method Worksheet
1. Enter the amount of the gross income limitation. See the Instructions for the Simplified Method Worksheet (below) . . . . . . . 1.
2. Allowable square footage for the qualified business use. Do not enter more than 300 square feet. See the Instructions for the
2.
Simplified Method Worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Simplified method amount
a. Maximum allowable amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3a.
$5
b. For daycare facilities not used exclusively for business, see the instructions for line 3b of this worksheet and enter the
decimal amount from the Daycare Facility Worksheet; otherwise, enter 1.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3b.
c. Multiply line 3a by line 3b and enter the result to 2 decimal places . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3c.
4. Multiply line 2 by line 3c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.
5. Allowable expenses using the simplified method. Enter the smaller of line 1 or line 4 here and include that amount on
Schedule C, line 30. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.
6. Carryover of unallowed expenses from a prior year that are not allowed in 2023.
a. Operating expenses. Enter the amount from your last Form 8829, line 43 (line 42 if before 2018). See the Instructions for
the Simplified Method Worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6a.
b. Excess casualty losses and depreciation. Enter the amount from your last Form 8829, line 44 (line 43 if before 2018). See
the Instructions for the Simplified Method Worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6b.
Instructions for the Simplified Method Worksheet
Use this worksheet to figure the amount of expenses you may deduct for a qualified business use of a home if you are electing to use the simplified method for
that home. If you are not electing to use the simplified method, use Form 8829.
Line 1. If all gross income from your trade or business is from this qualified business use of your home, figure your gross income limitation as follows.
A. Enter the amount from Schedule C, line 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Enter any gain derived from the business use of your home and shown on Form 8949 (and included on Schedule D) or Form
4797 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Add lines A and B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. Enter the total amount of any losses (as a positive number) shown on Form 8949 (and included on Schedule D) or Form 4797 that are
allocable to the business, but not allocable to the business use of the home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Gross income limitation. Subtract line D from line C. Enter the result here and on line 1 of the simplified method worksheet . . . . . . .
If some of the income is from a place of business other than your home, you must first determine the part of your gross income (Schedule C, line 7, and gains
from Form 8949, Schedule D, and Form 4797) from the business use of your home. In making this determination, consider the amount of time you spent at each
location as well as other facts. After determining the part of your gross income from the business use of your home, subtract from that amount the total expenses
shown on Schedule C, line 28, plus any losses shown on Form 8949 (and included on Schedule D) or Form 4797 that are allocable to the business in which you
use your home but that are not allocable to the business use of the home. Enter the result on line 1 of the simplified method worksheet.
Note: If you had more than one home in which you conducted this business during the year, include only the income earned and the deductions attributable to
that income during the period you owned the home for which you elected to use the simplified method.
Line 2. If you used the same area for the entire year, enter the smaller of the square feet you actually used or 300. If you and your spouse conducted the business
as a qualified joint venture, split the square feet between you and your spouse in the same manner you split your other tax attributes. If you shared space with
someone else, used the home for business for only part of the year, or the area you used changed during the year, see Figuring your allowable expenses for
business use of the home, before entering an amount on this line. Do not enter more than 300 square feet or, if applicable, the average monthly allowable square
footage on this line. See Part-year use or area changes (for simplified method only), later, for more information on how to figure your average monthly
allowable square footage.
Line 3b. If your qualified business use is providing daycare, you may need to account for the time that you used the same part of your home for other purposes.
If you used the part of your home exclusively and regularly for providing daycare, enter 1.0 on line 3b. If you did not use the part of your home exclusively for
providing daycare, complete the Daycare Facility Worksheet to figure what number to enter on line 3b.
Line 6. Because you are using the simplified method this year, you cannot deduct the amounts you entered on lines 6a and 6b this year. If you file Form 8829 in
a later year for your qualified business use of this home, you will be able to include these expenses when you figure your deduction.
6a. If you did not file a 2022 Form 8829, then your carryover of prior year operating expenses is the amount of operating expenses shown
in Part IV of the last Form 8829, if any, that you filed to claim a deduction for business use of the home.
6b. If you did not file a 2022 Form 8829, then your carryover of prior year excess casualty losses and depreciation is the amount of excess
casualty losses and depreciation shown in Part IV of the last Form 8829, if any, that you filed to claim a deduction for business use of
the home.
C-12
Keep for Your Records
Daycare Facility Worksheet (for simplified method)
1. Multiply days used for daycare during the year by hours used per day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.
2. Total hours available for use during the year. See the Instructions for the Daycare Facility Worksheet . . . . . . . . . . . . . . . 2.
3. Divide line 1 by line 2. Enter the result as a decimal amount here and on line 3b of the Simplified Method
Worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
Instructions for the Daycare Facility Worksheet
Use this worksheet to figure the percentage to use on line 3b of the Simplified Method Worksheet. If you do not use the area of your home exclusively for daycare, you
must reduce the prescribed rate before figuring your deduction using the simplified method.
If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to complete this worksheet. This worksheet is
only needed if you did not use the allowable area exclusively for daycare.
TIP
Line 1. Enter the total number of hours the facility was used for daycare during the year.
Example. Your home is used Monday through Friday for 12 hours per day for 250 days during the year. It is also used on 50 Saturdays for 8 hours a day. Enter 3,400 hours
on line 4 (3,000 hours for weekdays plus 400 hours for Saturdays).
Line 2. If you used your home for daycare during the entire year, multiply 365 days (366 for a leap year) by 24 hours, and enter the result.
If you started or stopped using your home for daycare during the year, you must prorate the number of hours based on the number of days the home was available for
daycare. Multiply 24 hours by the number of days available and enter that result.
Although you cannot deduct
any depreciation or section 179
expense for the portion of your
Shared use (for simplified method
only). If you share your home with
someone else who uses the home for a
separate business that also qualifies for
this deduction, you may not include the
same square feet to figure your deduc-
tion as the other person. You must allo-
cate the shared space between you and
the other person in a reasonable manner.
ble square footage. You figure the aver-
age monthly allowable square footage
by adding the amount of allowable
square feet you used in each month and
dividing the sum by 12.
TIP
home that is a qualified business use be-
cause you elect to use the simplified
method, you may still claim depreciation
or the section 179 expense deduction on
other assets (for example, furniture and
equipment) used in the qualified busi-
ness use of your home.
When determining the average
monthly allowable square footage, you
cannot take more than 300 square feet
into account for any one month. Addi-
tionally, if your qualified business use
was less than 15 days in a month, use -0-
for that month.
Example. Taylor and Logan are
roommates. Taylor uses 300 square feet
of their home for a qualified business
use. Logan uses 200 square feet of their
home for a separate qualified business
use. The qualified business uses share
100 square feet. In addition to the por-
tion that they do not share, Taylor and
Logan can both claim 50 of the 100
square feet or divide the 100 square feet
between them in any reasonable manner.
If divided evenly, Taylor could claim
250 square feet using the simplified
method and Logan could claim 150
square feet.
Figuring your allowable expenses for
business use of the home. You will fig-
ure the deduction using Form 8829 or
the Simplified Method Worksheet, or
both.
Example 1. Finley files a federal in-
come tax return on a calendar year basis.
On July 20, Finley began using 400
square feet of the home for a qualified
business use. Finley continued to use the
400 square feet until the end of the year.
Finley's average monthly allowable
square footage is 125 square feet (300
square feet for August through Decem-
ber divided by the number of months in
the year ((300 + 300 + 300 + 300 +
300)/12)).
You may not use the simplified
method and also file Form
8829 for the same qualified
!
CAUTION
business use of the same home.
Using Form 8829. Use Form 8829
to figure and claim this deduction for a
home if you are not or cannot use the
simplified method for that home. For in-
formation about claiming this deduction
using Form 8829, see the Instructions
for Form 8829 and Pub. 587.
Part-year use or area changes (for
simplified method only). If your quali-
fied business use was for a portion of the
tax year (for example, a seasonal busi-
ness, a business that begins during the
year, or you moved during the year) or
you changed the square footage of your
qualified business use, your deduction is
limited to the average monthly allowa-
Example 2. Riley files a federal in-
come tax return on a calendar year basis.
On April 20, Riley began using 100
square feet of the home for a qualified
business use. On August 5, Riley expan-
ded the area of qualified business use to
350 square feet. Riley continued to use
the 350 square feet until the end of the
year. Riley's average monthly allowable
Using the simplified method. Use
these instructions to figure your deduc-
tion for a qualified business use of your
home if you are electing to use the sim-
plified method for that home.
C-13
square footage is 150 square feet (100
square feet for May through July and
300 square feet for August through De-
cember divided by the number of
months in the year ((100 + 100 +100 +
300 + 300 + 300 + 300 + 300)/12)).
not use your home for business. You
cannot deduct any excess mortgage in-
terest, excess real estate taxes, or excess
casualty losses on Schedule C for this
home.
If you checked the "No" box on line
G, see the Instructions for Form 8582;
you may need to include information
from this schedule on Form 8582, even
if you have a net profit.
Use Part II of Schedule C to deduct
business expenses that are unrelated to
the qualified business use of the home
(for example, expenses for advertising,
wages, or supplies, or depreciation of
equipment or furniture).
Rental real estate activity. Unless
you are a qualifying real estate profes-
sional, a rental real estate activity is a
passive activity, even if you materially
participated in the activity. If you have a
loss, you may need to file Form 8582 to
apply a limitation that may reduce your
loss. See the Instructions for Form 8582.
Example 3. Carter files a federal in-
come tax return on a calendar year basis.
From January 1 through July 16, Carter
used 300 square feet of the home for a
qualified business use. On July 17, Car-
ter moved to a new home and immedi-
ately began using 200 square feet of the
new home for the same qualified busi-
ness use. Using the simplified method to
deduct expenses for the qualified busi-
ness use for the previous home, Carter’s
average monthly allowable square foot-
age is 175 square feet (300 square feet
for January through July divided by the
number of months in the year ((300 +
300 + 300 + 300 + 300 + 300 + 300)/
12)). Carter also prepared Form 8829 to
deduct the actual expenses associated
with the qualified business use of the
new home.
Deduction figured on multiple
forms. If you used more than one home
for a business during the year, use a
Form 8829 for each home or use the
simplified method for one home and
Form 8829 for any other home. Com-
bine the amount you figured using the
simplified method and the amounts you
figured on your Forms 8829, and then
enter the total on line 30 of the Sched-
ule C for that business.
Reporting your net profit or loss.
Once you have figured your net profit or
loss, report it as follows.
If you enter a loss on line 31,
you may have an excess busi-
ness loss. Use Form 461 to fig-
ure your excess business loss.
!
CAUTION
Individuals. Enter your net profit or
loss on line 31 and include it on Sched-
ule 1 (Form 1040), line 3. Also, include
your net profit or loss on Schedule SE,
line 2. However, if you are a statutory
employee or notary public, see Statutory
Line 31
Figuring your net profit or loss. If
your expenses (including the expenses
you report on line 30) are more than
your gross income, don’t enter your loss
on line 31 until you have applied the
at-risk rules and the passive activity loss
rules. To apply these rules, follow the in-
Instructions for Form 8582. After apply-
ing those rules, the amount on line 31
will be your loss, and it may be smaller
than the amount you figured by subtract-
ing line 30 from line 29.
Once you have determined your al-
lowable square footage, enter the result
on line 2 of the Simplified Method
Worksheet.
Nonresident aliens. Enter your net
profit or loss on line 31 and include it on
Schedule 1 (Form 1040), line 3. You
should also include this amount on
Schedule SE, line 2, if you are covered
under the U.S. social security system
due to an international social security
agreement currently in effect. See the In-
structions for Schedule SE for informa-
tion on international social security
agreements. However, if you are a statu-
tory employee or notary public, see Stat-
If you moved during the year,
your average allowable square
footage will generally be less
than 300.
!
CAUTION
You can use the Area Adjust-
ment Worksheet in Pub. 587 to
help you determine the allowa-
TIP
If your gross income is more than
your expenses (including the expenses
you report on line 30), and you don’t
have prior year unallowed passive activ-
ity losses, subtract line 30 from line 29.
The result is your net profit.
ble square footage to enter on line 2 of
the Simplified Method Worksheet.
Reporting your expenses for business
use of the home. If you did not use the
simplified method, include the amount
from line 36 of Form 8829 on line 30 of
the Schedule C you are filing for that
business.
Trusts and estates. Enter the net
profit or loss on line 31 and include it on
Form 1041, line 3.
If your gross income is more than
your expenses (including the expenses
you report on line 30), and you have pri-
or year unallowed passive activity los-
ses, don’t enter your net profit on line 31
until you have figured the amount of pri-
or year unallowed passive activity losses
you may claim this year for this activity.
Use Form 8582 to figure the amount of
prior year unallowed passive activity
losses you may include on line 31. Be
sure to indicate that you are including
prior year passive activity losses by en-
tering "PAL" to the left of the entry
space.
Statutory employees. Enter your net
profit or loss on line 31 and include it on
Schedule 1 (Form 1040), line 3. Howev-
er, do not report this amount on Sched-
ule SE, line 2. If you were a statutory
employee and you are required to file
Schedule SE because of other self-em-
ployment income, see the Instructions
for Schedule SE.
If you used the simplified method. If
you elect to use the simplified method
for the business use of a home, complete
the additional entry spaces on line 30 for
that home only. Include the amount from
line 5 of the Simplified Method Work-
sheet on line 30.
If you itemize your deductions on
Schedule A, you may deduct your mort-
gage interest, real estate taxes, and casu-
alty losses on Schedule A as if you did
Notary public. Do not enter your net
profit from line 31 on Schedule SE,
line 2, unless you are required to file
C-14
Schedule SE because you have other
self-employment income. See the In-
structions for Schedule SE.
Cash, property, or borrowed
on line 31. See the Instructions for Form
8582 for details.
•
amounts used in the business (or con-
tributed to the business, or used to ac-
quire the business) that are protected
against loss by a guarantee, stop-loss
agreement, or other similar arrangement
(excluding casualty insurance and insur-
ance against tort liability).
If you checked box 32b because
You can deduct one-half of your
some investment is not at risk
and you do not attach Form
6198, the processing of your return may
be delayed.
!
CAUTION
self-employment tax on Sched-
ule 1 (Form 1040), line 15. See
TIP
the Instructions for Schedule SE for de-
tails.
Amounts borrowed for use in the
•
At-risk loss deduction. Any loss from
this business not allowed for 2023 only
because of the at-risk rules is treated as a
deduction allocable to the business in
2024.
business from a person who has an inter-
est in the business, other than as a cred-
itor, or who is related under section
465(b)(3)(C) to a person (other than
you) having such an interest.
Community income. If you and your
spouse had community income and are
filing separate returns, see the Instruc-
tions for Schedule SE before figuring
self-employment tax.
More information. For details, see the
Instructions for Form 6198 and Pub.
925.
Figuring your loss. Before determining
your loss, check box 32a or 32b to indi-
cate whether the loss from your business
activity is limited by the at-risk rules.
Follow the instructions, next, that apply
to your box 32 activity.
Earned income credit (EIC). If you
have a net profit on line 31, this amount
is earned income and may qualify you
for the EIC.
To figure your EIC, use the in-
Part III. Cost of
Goods Sold
In most cases, if you engaged in a trade
or business in which the production, pur-
chase, or sale of merchandise was an in-
come-producing factor, you must take
inventories into account at the beginning
and end of your tax year.
structions for Form 1040,
line 27. Complete all applica-
ble steps plus Worksheet B. If you are re-
quired to file Schedule SE, remember to
enter one-half of your self-employment
tax in Part 1, line 1d, of Worksheet B.
!
CAUTION
Note. Line 32 doesn't apply to filers of
Form 1040-SS.
All investment is at risk. If all
amounts are at risk in this business,
check box 32a. If you answered “Yes”
on line G, your loss will not be reduced
by the at-risk rules or the passive activi-
how to report your loss.
Line 32
Exception for small business taxpay-
ers. If you are a small business taxpay-
er, you can choose not to keep an inven-
tory, but you must still use a method of
accounting for inventory that clearly re-
flects income. If you choose not to keep
an inventory, you won't be treated as
failing to clearly reflect income if your
method of accounting for inventory
treats inventory as non-incidental mate-
rial or supplies, or conforms to your fi-
nancial accounting treatment of invento-
ries. If, however, you choose to keep an
inventory, you must generally value the
inventory each year to determine your
cost of goods sold in Part III of Sched-
ule C.
You do not need to complete
line 32 if line 7 is more than the
total of lines 28 and 30.
TIP
If you answered “No” on line G, you
may need to complete Form 8582 to fig-
ure your loss to enter on line 31. See the
Instructions for Form 8582 for details.
At-risk rules. In most cases, if you
have a business loss and amounts inves-
ted in the business for which you are not
at risk, complete Form 6198 to apply a
limitation that may reduce your loss.
The at-risk rules generally limit the
amount of loss (including loss on the
disposition of assets) you can claim to
the amount you could actually lose in
the business.
Some investment is not at risk. If
some investment is not at risk, check
box 32b; the at-risk rules apply to your
loss. Be sure to attach Form 6198 to
your return.
If you answered "Yes" on line G,
complete Form 6198 to figure the loss to
enter on line 31. The passive activity
lier, for how to report your loss.
Check box 32b if you have amounts
invested in this business for which you
are not at risk, such as the following.
If you answered "No" on line G, the
passive activity loss rules may apply.
First, complete Form 6198 to figure the
amount of your profit or (loss) for the
at-risk activity, which may include
amounts reported on other forms and
schedules, and the at-risk amount for the
activity. Follow the Instructions for
Form 6198 to determine how much of
your Schedule C loss will be allowed.
After you figure the amount of your loss
that is allowed under the at-risk rules,
you may need to complete Form 8582 to
figure the passive activity loss to enter
Small business taxpayer. You quali-
fy as a small business taxpayer if you (a)
have average annual gross receipts of
$29 million or less for the 3 prior tax
years, and (b) are not a tax shelter (as
defined in section 448(d)(3)).
Nonrecourse loans used to finance
•
the business, to acquire property used in
the business, or to acquire the business
that are not secured by your own proper-
ty (other than property used in the busi-
ness), and for which you are not person-
ally responsible to repay. However, there
is an exception for certain nonrecourse
financing borrowed by you in connec-
tion with holding real property. See the
Instructions for Form 6198 and Pub.
925.
If your business has not been in exis-
tence for all of the 3-tax-year period
used in figuring average gross receipts,
base your average on the period it has
existed, and if your business has a pred-
ecessor entity, include the gross receipts
of the predecessor entity from the
3-tax-year period when figuring average
C-15
gross receipts. If your business (or pred-
ecessor entity) had short tax years for
any of the 3-tax-year period, annualize
your business' gross receipts for the
short tax years that are part of the
3-tax-year period.
new method of accounting and enter the
result on line 35. If there is a difference
between last year's closing inventory
and the refigured amount, attach an ex-
planation and take it into account when
figuring your section 481(a) adjustment.
F, earlier.
Part V. Other
Expenses. Line 48
Include all ordinary and necessary busi-
ness expenses not deducted elsewhere
on Schedule C. List the type and amount
of each expense separately in the space
provided. Enter the total on lines 48 and
27a. Do not include the cost of business
equipment or furniture; replacements or
permanent improvements to property; or
personal, living, and family expenses.
Do not include charitable contributions.
Also, you cannot deduct fines or penal-
ties paid to a government for violating
any law. For details on business expen-
See Pub. 538 for more information.
Treating inventory as non-incidental
material or supplies. If you account for
inventories as materials and supplies
that are not incidental, you deduct the
amounts paid to acquire or produce the
inventoriable items (treated as materials
and supplies) in the year in which they
are first used or consumed in your oper-
ations.
Part IV. Information
on Your Vehicle
Line 44b
In most cases, commuting is travel be-
tween your home and a work location. If
you converted your vehicle during the
year from personal to business use (or
vice versa), enter your commuting miles
only for the period you drove your vehi-
cle for business.
Financial accounting treatment of
inventories. Your financial accounting
treatment of inventories is determined
with regard to the method of accounting
you use in your applicable financial
statement (as defined in section 451(b)
(3)) or, if you do not have an applicable
financial statement, with regard to the
method of accounting you use in your
books and records that have been pre-
pared in accordance with your account-
ing procedures.
Amortization. Include amortization in
this part. For amortization that begins in
2023, complete and attach Form 4562.
You can amortize such costs as:
The cost of pollution-control fa-
cilities;
•
Travel that meets any of the follow-
ing conditions isn't commuting; it is
considered deductible business travel.
Amounts paid for research and ex-
perimentation;
•
You have at least one regular work
•
Amounts paid to acquire, protect,
expand, register, or defend trademarks
or trade names; or
•
location away from your home and the
travel is to a temporary work location in
the same trade or business, regardless of
the distance. Generally, a temporary
work location is one where your
More information. For more infor-
mation about this exception for small
businesses using this method of account-
ing for inventoriable items, see Pub.
538.
Goodwill and certain other intangi-
•
bles.
In most cases, you cannot amortize
real property construction period interest
and taxes. Special rules apply for allo-
cating interest to real or personal proper-
ty produced in your trade or business.
employment is expected to last 1 year or
less. See Pub. 463 for more details.
The travel is to a temporary work
location outside the metropolitan area
where you live and normally work.
•
Changing your method of account-
ing for inventory. If you want to
change your method of accounting for
inventory, file Form 3115. For details,
Your home is your principal place
For a complete list, see the instruc-
tions for Form 4562, Part VI.
•
of business under section 280A(c)(1)(A)
(for purposes of deducting expenses for
business use of your home) and the
travel is to another work location in the
same trade or business, regardless of
whether that location is regular or
At-risk loss deduction. Any loss from
this business that was not allowed last
year because of the at-risk rules is trea-
ted as a deduction allocable to this busi-
ness in 2023.
Certain direct and indirect ex-
penses may have to be capital-
ized or included in inventory.
!
CAUTION
temporary and regardless of distance.
ditional information.
Bad debts. Include debts and partial
debts from sales or services that were in-
cluded in income and are definitely
known to be worthless. If you later col-
lect a debt that you deducted as a bad
debt, include it as income in the year
chapter 8.
Line 47
Line 33
Specific recordkeeping rules apply to
car or truck expenses. For more infor-
mation about what records you must
keep, see Pub. 463.
Your inventories can be valued at cost,
the lower of cost or market, or any other
method approved by the IRS.
You may maintain written evidence
by using an electronic storage system
that meets certain requirements. For
more information about electronic stor-
age systems, see Pub. 583.
Line 33 doesn't apply to filers of
Form 1040-SS.
Business startup costs. If your busi-
ness began in 2023, you can elect to de-
duct up to $5,000 of certain business
startup costs. The $5,000 limit is re-
duced (but not below zero) by the
amount by which your total startup costs
exceed $50,000. Your remaining startup
Line 35
If you are changing your method of ac-
counting beginning with 2023, refigure
last year's closing inventory using your
C-16
costs can be amortized over
180-month period, beginning with the
month the business began.
a
paid for tangible property up to $2,500
per item or invoice.
figure and collect the right amount of
tax.
Only deduct these amounts as other
expenses. Don't include these amounts
on any other line.
You are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB
control number. Books or records relat-
ing to a form or its instructions must be
retained as long as their contents may
become material in the administration of
any Internal Revenue law. Generally, tax
returns and return information are confi-
dential, as required by section 6103.
For details, see IRS.gov/Newsroom/
For amortization that begins in 2023,
complete and attach Form 4562.
For details on making this election
and requirements for using the de mini-
mis safe harbor for tangible property,
Deduction for removing barriers to
individuals with disabilities and the
elderly. You may be able to deduct up
to $15,000 of costs paid or incurred in
2023 to remove architectural or trans-
portation barriers to individuals with
disabilities and the elderly. However,
you cannot take both a credit (on Form
8826) and a deduction for the same ex-
penditures.
Film and television and live theatrical
production expenses. You can elect to
deduct costs of certain qualified film and
television productions or qualified live
theatrical productions. See section 181,
for details.
The time needed to complete and file
Schedule C (Form 1040) will vary de-
pending on individual circumstances.
The estimated burden for individual tax-
payers filing this form is included in the
estimates shown in the instructions for
their individual income tax return. The
estimated burden for all other taxpayers
who file this form is approved under
OMB control number 1545-1974 and is
shown next.
Forestation and reforestation costs.
Reforestation costs are generally capital
expenditures. However, for each quali-
fied timber property, you can elect to ex-
pense up to $10,000 ($5,000 if married
filing separately) of qualifying reforesta-
tion costs paid or incurred in 2023.
De minimis safe harbor for tangible
property. Generally, you must capital-
ize costs to acquire or produce real or
tangible personal property used in your
trade or business, such as buildings,
equipment, or furniture. However, if you
elect to use the de minimis safe harbor
for tangible property, you may deduct de
minimis amounts paid to acquire or pro-
duce certain tangible property if these
amounts are deducted by you for finan-
cial accounting purposes or in keeping
your books and records.
You can elect to amortize the remain-
ing costs over 84 months. For amortiza-
tion that begins in 2023, complete and
attach Form 4562.
Recordkeeping
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.
3 hr., 36 min.
Learning about the law or the
form
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1 hr., 19 min.
1 hr., 39 min.
The amortization election and the ex-
pense election don’t apply to trusts. For
details on reforestation expenses, see
Preparing the form
Copying, assembling, and sending
the form to the IRS
.
.
.
.
.
.
34 min.
If you have an applicable financial
statement, you may use this safe harbor
to deduct amounts paid for tangible
property up to $5,000 per item or in-
voice. If you don't have an applicable fi-
nancial statement, you may use the de
minimis safe harbor to deduct amounts
Paperwork Reduction Act Notice. We
ask for the information on Schedule C
(Form 1040) to carry out the Internal
Revenue laws of the United States. You
are required to give us the information.
We need it to ensure that you are com-
plying with these laws and to allow us to
If you have comments concerning the
accuracy of these time estimates or sug-
gestions for making this form simpler,
we would be happy to hear from you.
See the instructions for the tax return
with which this form is filed.
C-17
Principal Business or
Professional Activity
Codes
six-digit codes are based on the North American
Industry Classification System (NAICS).
estate agent). Now find the six-digit code assigned to
this activity (for example, 531210, the code for offices
of real estate agents and brokers) and enter it on
Schedule C, line B.
North American Industry
Classification System (NAICS).
Select the category that best describes your
primary business activity (for example, Real Estate).
Then select the activity that best identifies the principal
source of your sales or receipts (for example, real
These codes for the Principal Business or Professional
Activity classify sole proprietorships by the type of
activity they are engaged in to facilitate the
Note. If your principal source of income is from
farming activities, you should file Schedule F.
administration of the Internal Revenue Code. These
113000 Forestry & logging (including
238170 Siding contractors
238910 Site preparation contractors
238120 Structural steel & precast
concrete construction
contractors
238340 Tile & terrazzo contractors
238290 Other building equipment
contractors
238390 Other building finishing
contractors
238190 Other foundation, structure, &
building exterior contractors
621400 Outpatient care centers
Accommodation, Food
forest nurseries & timber tracts)
621900 Other ambulatory health care
services (including ambulance
Services, & Drinking Places
114210 Hunting & trapping
Support Activities for Agriculture &
Forestry
115210 Support activities for animal
production (including farriers)
Accommodation
721310 Rooming & boarding houses,
dormitories, & workers' camps
721210 RV (recreational vehicle) parks
& recreational camps
721100 Traveler accommodation
(including hotels, motels, & bed
& breakfast inns)
Food Services & Drinking Places
722514 Cafeterias, grill buffets, &
buffets
722410 Drinking places (alcoholic
beverages)
722511 Full-service restaurants
722513 Limited-service restaurants
722515 Snack & non-alcoholic beverage
bars
722300 Special food services (including
food service contractors &
caterers)
services, blood, & organ banks)
Hospitals
622000 Hospitals
Nursing & Residential Care Facilities
623000 Nursing & residential care
facilities
Social Assistance
624410 Childcare services
624200 Community food & housing, &
emergency & other relief
services
115110 Support activities for crop
production (including cotton
ginning, soil preparation,
planting, & cultivating)
115310 Support activities for forestry
Arts, Entertainment, &
Recreation
Amusement, Gambling, & Recreation
Industries
713100 Amusement parks & arcades
713200 Gambling industries
713900 Other amusement & recreation
services (including golf courses,
skiing facilities, marinas, fitness
centers, bowling centers, skating
rinks, miniature golf courses)
Museums, Historical Sites, & Similar
Institutions
712100 Museums, historical sites, &
similar institutions
Performing Arts, Spectator Sports, &
Related Industries
711410 Agents & managers for artists,
athletes, entertainers, & other
public figures
238990 All other specialty trade
contractors
Educational Services
624100 Individual & family services
624310 Vocational rehabilitation
services
611000 Educational services (including
schools, colleges, &
universities)
Information
Publishing Industries
513000 Publishing industries
Broadcasting & Content Providers &
Telecommunications
516000 Broadcasting & content
providers
517000 Telecommunications (including
Wired, Wireless, Satellite, Cable
& Other Program Distribution,
Resellers, Agents, Other
Telecommunications, & Internet
service providers)
Data Processing, Web Search Portals, &
Other Information Services
518210 Computing infrastructure
providers, data processing, web
hosting, & related services
519200 Web search portals, libraries,
archives, & other info. services
Finance & Insurance
Credit Intermediation & Related
Activities
522100 Depository credit intermediation
(including commercial banking,
savings institutions, & credit
unions)
522200 Nondepository credit
intermediation (including sales
financing & consumer lending)
522300 Activities related to credit
intermediation (including loan
brokers)
Insurance Agents, Brokers, & Related
Activities
524210 Insurance agencies &
brokerages
524290 Other insurance related
activities
Securities, Commodity Contracts, &
Other Financial Investments & Related
Activities
523160 Commodity contracts
intermediation
523150 Investment banking & securities
intermediation
523210 Securities & commodity
exchanges
Administrative & Support and
Waste Management &
Remediation Services
Administrative & Support Services
561430 Business service centers
(including private mail centers
& copy shops)
561740 Carpet & upholstery cleaning
services
561440 Collection agencies
561450 Credit bureaus
561410 Document preparation services
561300 Employment services
561710 Exterminating & pest control
services
561210 Facilities support (management)
services
561600 Investigation & security services
561720 Janitorial services
561730 Landscaping services
711510 Independent artists, writers, &
performers
711100 Performing arts companies
711300 Promoters of performing arts,
sports, & similar events
711210 Spectator sports (including
professional sports clubs &
racetrack operations)
Motion Picture & Sound Recording
512100 Motion picture & video
industries (except video rental)
Construction of Buildings
236200 Nonresidential building
construction
236100 Residential building
construction
Heavy and Civil Engineering
Construction
237310 Highway, street, & bridge
construction
237210 Land subdivision
237100 Utility system construction
237990 Other heavy & civil engineering
construction
Specialty Trade Contractors
238310 Drywall & insulation
contractors
238210 Electrical contractors
238350 Finish carpentry contractors
238330 Flooring contractors
238130 Framing carpentry contractors
238150 Glass & glazing contractors
238140 Masonry contractors
238320 Painting & wall covering
contractors
238220 Plumbing, heating & air-
conditioning contractors
238110 Poured concrete foundation &
structure contractors
512200 Sound recording industries
Manufacturing
315000 Apparel mfg.
312000 Beverage & tobacco product
mfg.
334000 Computer & electronic product
mfg.
335000 Electrical equipment, appliance,
& component mfg.
332000 Fabricated metal product mfg.
337000 Furniture & related product mfg.
333000 Machinery mfg.
339110 Medical equipment & supplies
mfg.
322000 Paper mfg.
561110 Office administrative services
561420 Telephone call centers
(including telephone answering
services & telemarketing
bureaus)
561500 Travel arrangement &
reservation services
561490 Other business support services
(including repossession services,
court reporting, & stenotype
services)
561790 Other services to buildings &
dwellings
561900 Other support services
(including packaging & labeling
services, & convention & trade
show organizers)
Waste Management & Remediation
Services
523900 Other financial investment
activities (including investment
advice)
Health Care & Social Assistance
Ambulatory Health Care Services
621610 Home health care services
621510 Medical & diagnostic
laboratories
621310 Offices of chiropractors
621210 Offices of dentists
621330 Offices of mental health
practitioners (except physicians) 326000 Plastics & rubber products mfg.
621320 Offices of optometrists
324100 Petroleum & coal products mfg.
331000 Primary metal mfg.
323100 Printing & related support
activities
621340 Offices of physical,
occupational & speech
therapists, & audiologists
313000 Textile mills
562000 Waste management &
remediation services
621111 Offices of physicians (except
mental health specialists)
621112 Offices of physicians, mental
health specialists
314000 Textile product mills
336000 Transportation equipment mfg.
321000 Wood product mfg.
339900 Other miscellaneous mfg.
Chemical Manufacturing
Agriculture, Forestry, Hunting, &
Fishing
112900 Animal production (including
breeding of cats and dogs)
621391 Offices of podiatrists
621399 Offices of all other
miscellaneous health
practitioners
325100 Basic chemical mfg.
114110 Fishing
238160 Roofing contractors
C-18
North American Industry Classification System (NAICS). (Continued)
325500 Paint, coating, & adhesive mfg.
325300 Pesticide, fertilizer, & other
agricultural chemical mfg.
325410 Pharmaceutical & medicine
mfg.
325200 Resin, synthetic rubber, &
artificial & synthetic fibers &
filaments mfg.
325600 Soap, cleaning compound, &
toilet preparation mfg.
325900 Other chemical product &
preparation mfg.
Food Manufacturing
311110 Animal food mfg.
311800 Bakeries, tortilla, & dry pasta
mfg.
311500 Dairy product mfg.
311400 Fruit & vegetable preserving &
speciality food mfg.
311200 Grain & oilseed milling
311610 Animal slaughtering &
processing
311710 Seafood product preparation &
packaging
311300 Sugar & confectionery product
mfg.
311900 Other food mfg. (including
coffee, tea, flavorings, &
seasonings)
Leather & Allied Product
Manufacturing
316210 Footwear mfg. (including
leather, rubber, & plastics)
316110 Leather & hide tanning &
finishing
316990 Other leather & allied product
mfg.
Nonmetallic Mineral Product
Manufacturing
327300 Cement & concrete product
mfg.
327100 Clay product & refractory mfg.
327210 Glass & glass product mfg.
327400 Lime & gypsum product mfg.
327900 Other nonmetallic mineral
product mfg.
811190 Other automotive repair &
maintenance (including oil
change & lubrication shops &
car washes)
811310 Commercial & industrial
machinery & equipment (except
automotive & electronic) repair
& maintenance
811210 Electronic & precision
equipment repair & maintenance
811430 Footwear & leather goods repair
811410 Home & garden equipment &
appliance repair & maintenance
811420 Reupholstery & furniture repair
811490 Other personal & household
goods repair & maintenance
532282 Video tape & disc rental
532289 Other consumer goods rental
459410 Office supplies & stationery
retailers
459910 Pet & pet supplies retailers
459510 Used merchandise retailers
459990 All other miscellaneous retailers
(including tobacco, candle, &
trophy retailers)
Religious, Grantmaking, Civic,
Professional, & Similar
Organizations
813000 Religious, grantmaking, civic,
professional, & similar
Nonstore Retailers
organizations
xx
Nonstore retailers sell all types
of merchandise using such
methods as Internet, mail-order
catalogs, interactive television,
or direct sales. These types of
Retailers should select the PBA
associated with their primary
line of products sold.
Retail Trade
Building Material & Garden
Equipment & Supplies Dealers
444140 Hardware retailers
444110 Home centers
444200 Lawn & garden equipment &
supplies retailers
444120 Paint & wallpaper retailers
444180 Other building materials dealers
Clothing & Accessories Retailers
458110 Clothing & clothing accessories
retailers
458310 Jewelry retailers
458320 Luggage & leather goods
retailers
458210 Shoe retailers
Electronic & Appliance Retailers
449210 Electronics & appliance retailers
(including computers)
Food & Beverage Retailers
445320 Beer, wine, & liquor retailers
445250 Fish & seafood retailers
445230 Fruit & vegetable retailers
445100 Grocery & convenience retailers
445240 Meat retailers
445290 Other specialty food retailers
445132 Vending machine operators
Furniture & Home Furnishings
Retailers
449110 Furniture retailers
449120 Home furnishings retailers
Gasoline Stations & Fuel dealers
457100 Gasoline stations (including
convenience stores with gas)
457210 Fuel dealers (including heating
oil & liquefied petroleum)
General Merchandise Retailers
455000 General merchandise retailers
Health & Personal Care Retailers
456120 Cosmetics, beauty supplies, &
perfume retailers
456130 Optical goods retailers
456110 Pharmacies & drug retailers
456190 Other health & personal care
retailers
Motor Vehicle & Parts Dealers
441300 Automotive parts, accessories,
& tire retailers
441222 Boat dealers
xx
For example, establishments
primarily selling prescription
and non-prescription drugs,
select PBA code 456110
Professional, Scientific, &
Technical Services
541100 Legal services
Pharmacies & Drug Retailers.
541211 Offices of certified public
accountants
541214 Payroll services
541213 Tax preparation services
541219 Other accounting services
Architectural, Engineering, & Related
Services
541310 Architectural services
541350 Building inspection services
541340 Drafting services
541330 Engineering services
541360 Geophysical surveying &
mapping services
541320 Landscape architecture services
541370 Surveying & mapping (except
geophysical) services
541380 Testing laboratories & services
Computer Systems Design & Related
Services
541510 Computer systems design &
related services
Specialized Design Services
541400 Specialized design services
(including interior, industrial,
graphic, & fashion design)
Other Professional, Scientific, &
Technical Services
541800 Advertising, public relations, &
related services
541600 Management, scientific, &
technical consulting services
541910 Market research & public
opinion polling
541920 Photographic services
541700 Scientific research &
development services
541930 Translation & interpretation
services
541940 Veterinary services
541990 All other professional, scientific,
& technical services
Transportation & Warehousing
481000 Air transportation
485510 Charter bus industry
484110 General freight trucking, local
484120 General freight trucking, long
distance
485210 Interurban & rural bus
transportation
486000 Pipeline transportation
482110 Rail transportation
487000 Scenic & sightseeing
transportation
485410 School & employee bus
transportation
484200 Specialized freight trucking
(including household moving
vans)
485300 Taxi, limousine, & ridesharing
service
485110 Urban transit systems
483000 Water transportation
485990 Other transit & ground
passenger transportation
488000 Support activities for
transportation (including motor
vehicle towing)
Couriers & Messengers
492000 Couriers & messengers
Warehousing & Storage Facilities
Mining
212110 Coal mining
211120 Crude petroleum extraction
212200 Metal ore mining
211130 Natural gas extraction
212300 Nonmetallic mineral mining &
quarrying
493100 Warehousing & storage (except
leases of miniwarehouses &
self-storage units)
Utilities
221000 Utilities
213110 Support activities for mining
Other Services
Personal & Laundry Services
812111 Barber shops
812112 Beauty salons
812220 Cemeteries & crematories
Wholesale Trade
Merchant Wholesalers, Durable Goods
423200 Furniture & home furnishing
423700 Hardware, & plumbing &
heating equipment & supplies
441227 Motorcycle, ATV, & all other
motor vehicle dealers
441110 New car dealers
441210 Recreational vehicle dealers
(including motor home & travel
trailer dealers)
441120 Used car dealers
Sporting Goods, Hobby, Book, Musical
Instrument & Miscellaneous Retailers
459210 Book retailers & news dealers
(including newsstands)
459120 Hobby, toy, & game retailers
459140 Musical instrument & supplies
retailers
459130 Sewing, needlework, & piece
goods retailers
459110 Sporting goods retailers
459920 Art dealers
459310 Florists
459420 Gift, novelty, & souvenir
retailers
459930 Manufactured (mobile) home
dealers
812310 Coin-operated laundries &
drycleaners
812320 Drycleaning & laundry services
(except coin-operated)
(including laundry &
drycleaning drop-off & pickup
sites)
812210 Funeral homes & funeral
services
812330 Linen & uniform supply
812113 Nail salons
812930 Parking lots & garages
812910 Pet care (except veterinary)
services
812920 Photofinishing
812190 Other personal care services
(including diet & weight
reducing centers)
812990 All other personal services
Repair & Maintenance
811120 Automotive body, paint, interior,
& glass repair
811110 Automotive mechanical &
electrical repair & maintenance
423600 Household appliances &
electrical & electronic goods
423940 Jewelry, watch, precious stone,
& precious metals
423300 Lumber & other construction
materials
423800 Machinery, equipment, &
supplies
423500 Metal & mineral (except
petroleum)
423100 Motor vehicle & motor vehicle
parts & supplies
423400 Professional & commercial
equipment & supplies
423930 Recyclable materials
423910 Sporting & recreational goods &
supplies
423920 Toy & hobby goods & supplies
423990 Other miscellaneous durable
goods
Merchant Wholesalers, Nondurable
Goods
Real Estate & Rental & Leasing
Real Estate
531100 Lessors of real estate (including
miniwarehouses & self-storage
units)
531210 Offices of real estate agents &
brokers
531320 Offices of real estate appraisers
531310 Real estate property managers
531390 Other activities related to real
estate
Rental & Leasing Services
532100 Automotive equipment rental &
leasing
532400 Commercial & industrial
machinery & equipment rental
& leasing
532210 Consumer electronics &
appliances rental
532281 Formal wear & costume rental
532310 General rental centers
532283 Home health equipment rental
532284 Recreational goods rental
424300 Apparel, piece goods, & notions
C-19
North American Industry Classification System (NAICS). (Continued)
424800 Beer, wine, & distilled alcoholic 424910 Farm supplies
beverages
424700 Petroleum & petroleum products
Wholesale Trade Agents &
Brokers
424930 Flower, nursery stock, & florists' 424940 Tobacco products & electronic
424920 Books, periodicals, &
newspapers
supplies
cigarettes
425120 Wholesale trade agents &
brokers
424400 Grocery & related products
424950 Paint, varnish, & supplies
424100 Paper & paper products
424990 Other miscellaneous nondurable
goods
424600 Chemical & allied products
424210 Drugs & druggists' sundries
424500 Farm product raw materials
999000 Unclassified establishments
(unable to classify)
C-20