Schedule C
Schedule C: Sole-Prop Profit or Loss
Schedule C of the 2025 Form 1040 reports sole-proprietor profit or loss. Gross receipts minus ordinary and necessary expenses under §162 give net profit, which carries to Schedule 1 and can trigger self-employment tax under §1401.
Gross receipts minus §162 expenses
Every dollar of business income goes on top; ordinary and necessary expenses — supplies, advertising, mileage, insurance, contractors, the business share of mixed costs — come off. Personal spending never qualifies, and hobby losses face §183 limits, so document the profit motive.
The home office shortcut
Exclusive, regular business use of part of your home qualifies for the simplified method: $5 per square foot, up to $1,500 a year. No depreciation recapture, no actual-expense allocation — most small sole props should take it and move on.
Where profit lands next
Net profit carries to Schedule 1 and into total income; a net loss offsets other income within the limits. Net earnings of $400 or more also trigger self-employment tax at 15.3% under §1401 via Schedule SE — the bill new sole props never see coming.
Questions, answered
- What expenses can Schedule C deduct?
- Ordinary and necessary business expenses under section 162 — supplies, advertising, mileage, insurance, contractors, and the business share of mixed costs. Personal spending never qualifies.
- How does the simplified home office work?
- Take $5 per square foot of exclusive, regular business use, up to $1,500 a year. No depreciation recapture, no actual-expense allocation.
- Where does net profit go?
- Net profit carries to Schedule 1 and into total income. Net earnings of $400 or more also trigger self-employment tax at 15.3% under section 1401.
Keep reading: Total Income · AGI · Line 1 Wages