Department of the Treasury

Internal Revenue Service

2023 Instructions for Schedule C

Profit or Loss 

From Business

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 activity, 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.

Also, use Schedule C to report (a) wages and expenses you had as a statutory employee; (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.

Future Developments

For the latest information about developments related to Schedule C and its 

instructions, such as legislation enacted 

after they were published, go to IRS.gov/

ScheduleC.

What's New

Redesigned Form 1040-SS. For 2023, 

Schedule C (Form 1040) is available to 

be filed with Form 1040-SS, if applicable. It replaces Form 1040-SS, Part IV. 

For additional information, see the Instructions for Form 1040-SS.

Standard mileage rate. The business 

standard mileage rate for 2023 is 65.5 

cents per mile.

Business meals deduction. The temporary 100% deduction for food or beverages provided by a restaurant has expired. The business meals deduction is 

now 50%.

Energy efficient commercial buildings 

deduction. The energy efficient commercial buildings deduction is now reported on new line 27b.

Bonus depreciation. The bonus depreciation deduction under section 168(k) 

begins its phaseout in 2023 with a reduction of the applicable limit from 

100% to 80%.

Commercial clean vehicle credit. 

Businesses that buy a qualified commercial clean vehicle may qualify for a 

clean vehicle tax credit. See Form 8936 

and its instructions for more information.

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, 

services, or goods. Go to IRS.gov/Gig to 

get more information about the tax consequences of participating in the gig 

economy.

Excess business loss limitation. If you 

report a loss on line 31 of your Schedule C (Form 1040), you may be subject 

to a business loss limitation. The disallowed 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.

See Form 461 and its instructions for 

details on the excess business loss limitation.

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 

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 

Center at IRS.gov/SmallBiz.

General 

Instructions

Other Schedules and Forms 

You May Have To File

• Schedule A (Form 1040) to deduct 

interest, taxes, and casualty losses not 

related to your business.

• Schedule E (Form 1040) to report 

rental real estate and royalty income or 

(loss) that is not subject to 

self-employment tax.

• Schedule F (Form 1040) to report 

profit or (loss) from farming.

• 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.

• Form 461 to report an excess 

business loss.

• Form 3800 to claim any of the 

general business credits.

• Form 4562 to claim depreciation 

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 

Jan 24, 2024 Cat. No. 24329W C-1
property, or to report information on 

listed property.

• Form 4684 to report a casualty or 

theft gain or (loss) involving property 

used in your trade or business or 

income-producing property.

• Form 4797 to report sales, 

exchanges, and involuntary conversions 

(not from a casualty or theft) of trade or 

business property.

• 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.

• 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.

• Form 8594 to report certain 

purchases or sales of groups of assets 

that constitute a trade or business.

• 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.

• Form 8960 to pay Net Investment 

Income Tax on certain income from 

your passive activities.

• 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 company (LLC). Generally, a single-member domestic LLC is not treated as a separate 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.

Single-member LLCs with employees. 

A single-member LLC must file employment tax returns using the LLC's 

name and employer identification number (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.

Heavy highway vehicle use tax. If you 

use certain highway trucks, truck-trailers, 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 

to IRS.gov/Trucker for the most recent 

developments.

Information returns. You may have to 

file information returns for wages paid 

to employees, and certain payments of 

fees and other nonemployee compensation, interest, rents, royalties, real estate 

transactions, annuities, and pensions. 

See Line I, later, and the 2023 General 

Instructions for Certain Information Returns for details and other payments that 

may require you to file a Form 1099.

If you received cash of more than 

$10,000 in one or more related transactions 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/

Businesses/Small-Businesses-SelfEmployed/IRS-Form-8300-ReferenceGuide.

Business Owned and 

Operated by Spouses

Generally, if you and your spouse jointly 

own and operate an unincorporated business and share in the profits and losses, 

you are partners in a partnership, whether 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.

• You and your spouse elect to be 

treated as a qualified joint venture. See 

Qualified Joint Venture next.

• You and your spouse wholly own 

the unincorporated business as community property and you treat the business as 

a sole proprietorship. See Community 

Income, later.

Otherwise, use Form 1065. See Pub. 541 

for information about partnerships.

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:

• Each materially participate in the 

business (see Material participation, later, in the instructions for line G);

• Are the only owners of the business; and

• File a joint return for the tax year.

Making the election will allow you to 

avoid the complexity of Form 1065, but 

still give each of you credit for social security earnings on which retirement benefits, disability benefits, survivor benefits, and insurance (Medicare) benefits 

are based. In most cases, this election 

will not increase the total tax owed on 

the joint return.

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.

Only businesses that are owned 

and operated by spouses as 

co-owners (and not in the name 

of a state law entity) qualify for the election. Thus, a business owned and operated by spouses through an LLC does 

not qualify for the election of a qualified 

joint venture.

Making the election. To make this 

election, divide all items of income, 

gain, loss, deduction, and credit attributable to the business between you and 

your spouse based on your respective interests in the business. Each of you must 

file a separate Schedule C or F. Enter 

your share of the applicable income, deduction, or (loss) on the appropriate 

lines of your separate Schedule C or F. 

Each of you may also need to file a separate Schedule SE to pay self-employment tax. If the business was taxed as a 

partnership before you made the election, the partnership will be treated as 

terminating at the end of the preceding 

tax year. For information on how to report the termination of the partnership, 

see Pub. 541.

Revoking the election. The election 

can be revoked only with the permission 

of the IRS. However, the election remains in effect only for as long as you 

and your spouse continue to meet the requirements to make the election. If you 

and your spouse fail to meet the requirements for any year, you will need to 

make a new election to be treated as a 

qualified joint venture in any future 

year.

CAUTION

!

C-2
Employer identification number 

(EIN). You and your spouse do not 

need to obtain an EIN to make the election. But you may need an EIN to file 

other returns, such as employment or excise tax returns. To apply for an EIN, see 

the Instructions for Form SS-4 or go to 

IRS.gov/EIN.

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 limitation rules. Electing qualified joint 

venture status does not alter the application of the self-employment tax or the 

passive loss limitation rules.

More information. For more information on qualified joint ventures, go to 

IRS.gov/QJV.

Community Income

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 partnership. Any change in your reporting position will be treated as a conversion of 

the entity.

Report your income and deductions 

as follows.

• If only one spouse participates in 

the business, all of the income from that 

business is the self-employment earnings of the spouse who carried on the 

business.

• If both spouses participate, the income and deductions are allocated to the 

spouses based on their distributive 

shares.

• If either or both spouses are partners in a partnership, see Pub. 541.

• If both spouses elected to treat the 

business as a qualifying joint venture, 

see Qualified Joint Venture, earlier.

States with community property laws 

include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, 

Washington, and Wisconsin. See Pub. 

555 for more information about community property laws.

Reportable Transaction 

Disclosure Statement

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 penalties on any reportable transaction understatements. The following are reportable 

transactions.

• 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 confidentiality for which you paid an advisor 

a fee of at least $50,000.

• Certain transactions for which you 

or a related party have contractual protection against disallowance of the tax 

benefits.

• Certain transactions resulting in a 

loss of at least $2 million in any single 

tax year or $4 million in any combination 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 corporation or partnership.)

• Certain transactions of interest entered into that are the same or substantially similar to one of the types of transactions that the IRS has identified by 

published guidance as a transaction of 

interest.

See the Instructions for Form 8886 

for more details.

Capital Construction Fund

Do not claim on Schedule C the deduction for amounts contributed to a capital 

construction fund set up under chapter 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 details, see Pub. 595.

Additional Information

See Pub. 334 for more information for 

small businesses.

Specific 

Instructions

Filers of Form 1041. Do not complete 

the block labeled “Social security number (SSN).” Instead, enter the EIN issued to the estate or trust on line C.

Line A

Describe the business or professional activity 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 activity and the type of product or service. If 

your general field or activity is wholesale or retail trade, or services connected 

with production services (mining, construction, or manufacturing), also give 

the type of customer or client; for example, “wholesale sale of hardware to retailers” or “appraisal of real estate for 

lending institutions.”

Line B

Enter on line B the six-digit code from 

the Principal Business or Professional 

Activity Codes chart at the end of these 

instructions. For nonstore retailers, select the PBA code by the primary product that your establishment sells. For example, establishments primarily selling 

prescription and non-prescription drugs, 

select PBA code 456110 Pharmacies & 

drug retailers.

Line D

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.

You need an EIN only if you have a 

qualified retirement plan or are required 

to file employment, excise, alcohol, tobacco, or firearms returns, or are a payer 

of gambling winnings. If you need an 

EIN, see the Instructions for Form SS-4.

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 

C-3
legal name) for a qualified retirement 

plan, to file employment, excise, alcohol, tobacco, or firearms returns, or as a 

payer of gambling winnings. If you do 

not have such an EIN, leave line D 

blank.

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.

Line F

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 clearly reflect income. Unless you are a small 

business taxpayer (defined later under 

Part III), you must use an accrual method 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/

2022-02_IRB#REV-PROC-2022-9.

If you use the cash method, show all 

items of taxable income actually or constructively received during the year (in 

cash, property, or services). Income is 

constructively received when it is credited 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 expenditure 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 

chapter 2 of Pub. 334, Tax Guide for 

Small Business.

For amounts includible in income and 

deductible as expense under an accrual 

method, see Pub. 538.

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.

Example. You change to the cash 

method of accounting and choose to account for inventoriable items in the same 

manner as non-incidental materials and 

supplies for the 2023 tax year. You accrued sales in 2022 for which you received payment in 2023. You must report those sales in both years as a result 

of changing your accounting method 

and must make a section 481(a) adjustment to prevent duplication of income.

A net negative section 481 adjustment is generally taken into account in 

the year of change. A net positive section 481(a) adjustment is generally taken 

into account over a period of 4 years. Include any net positive section 481(a) adjustments on line 6. If the net section 

481(a) adjustment is negative, report it 

in Part V.

More information. For more information about changing your accounting 

method and the section 481(a) adjustment, see the Instructions for Form 

3115. Additional information is also 

available in various revenue procedures. 

See Rev. Proc. 2022-14 (and any subsequent revenue procedures modifying 

Rev. Proc. 2022-14) for a list of automatic changes, including a description 

of its effect on prior lists of automatic 

changes. Rev. Proc. 2022-14 is available 

at IRS.gov/irb/2022-07_IRB#REVPROC-2022-14.

Line G

If your business activity is not a rental 

activity and you meet any of the material participation tests, explained next, or 

the exception for oil and gas applies, 

check the “Yes” box. Otherwise, check 

“No.” If you check “No,” this activity is 

passive. If you have a loss from a passive activity, see Limit on losses, later. If 

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.

Material participation. For purposes 

of the seven material participation tests 

listed later, participation generally includes 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 

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 activity is not treated as participation unless you were directly involved in the 

day-to-day management or operations of 

the activity. Work performed as an investor includes:

• 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

• Monitoring the finances or operations of the activity in a nonmanagerial 

capacity.

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 applies even if your spouse did not own an 

interest in the activity and whether or 

not you and your spouse file a joint return. 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 venture instead of a partnership (see Qualified Joint Venture, earlier).

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 following seven tests.

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 individuals (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.

4. The activity is a significant participation activity for the tax year, and 

you participated in all significant participation activities for more than 500 hours 

during the year. An activity is a “signifiC-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).

5. You materially participated in the 

activity for any 5 of the prior 10 tax 

years.

6. The activity is a personal service 

activity in which you materially participated for any 3 prior tax years. A personal service activity is an activity that 

involves performing personal services in 

the field of health, law, engineering, architecture, accounting, actuarial science, 

performing arts, or consulting, or any 

other trade or business in which capital 

is not a material income-producing factor.

7. Based on all the facts and circumstances, 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 determining 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 (regardless of whether the person was compensated for the services).

Rental of personal property. Generally, 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 Activities in the Instructions for Form 

8582, the rental of the property is not 

treated as a rental activity and the material participation rules explained earlier 

apply.

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 directly or through an entity that does not 

limit your liability, check the “Yes” box. 

The activity of owning a working interest is not a passive activity, regardless of 

your participation.

Limit on losses. Your business activity 

loss may be limited if you checked the 

“No” box on line G. In addition, your 

rental activity loss may be limited even 

if you materially participated. In general, a business activity in which you do 

not materially participate or a rental activity 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.

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 restarting this business after temporarily 

closing it, and you did not file a 2022 

Schedule C for this business.

Line I

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.

You may have to file information returns for wages paid to employees, certain payments of fees and other nonemployee compensation, interest, rents, 

royalties, real estate transactions, annuities, 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-commission, or other similar basis for resale.

Note. Line I doesn't apply to filers of 

Form 1040-SS.

The Guide to Information Returns in the 2023 General Instructions for Certain Information Returns identifies which Forms 

1099 must be filed, the amounts to report, and the due dates for the required 

Forms 1099.

Part I. Income

Except as otherwise provided in the Internal Revenue Code, gross income includes income from whatever source derived. In certain circumstances, however, gross income does not include extraterritorial income that is qualifying foreign trade income. Use Form 8873 to 

TIP

figure the extraterritorial income exclusion. Report it on Schedule C as explained in the Instructions for Form 

8873.

If you were a debtor in a chapter 11 

bankruptcy case during 2023, see Chapter 11 Bankruptcy Cases in the Instructions for Form 1040 (under Income) and 

the Instructions for Schedule SE.

Be sure to report all income attributable to your trade or business from all 

sources. You may receive one or more 

Forms 1099 from people who are required to provide information to the IRS 

listing amounts that may be income you 

received as a result of your trade or business activities. The following is a list of 

some of the common Forms 1099.

• 1099-MISC. For more information 

about what is reported on Form 

1099-MISC, see the Instructions for Recipient included on that form.

• 1099-NEC. For more information 

about what is reported on Form 

1099-NEC, see the Instructions for Recipient included on that form.

• 1099-K. For more information 

about what is reported on Form 1099-K, 

see the Instructions for Payee included 

on that form and go to IRS.gov/Gig.

Income you report on Schedule C may be qualified business 

income and entitle you to a deduction on Form 1040 or 1040-SR, 

line 13. See Forms 8995 and 8995-A, 

and IRS.gov/Newsroom/Facts-Aboutthe-Qualified-Business-IncomeDeduction.

Line 1

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.

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 statement explaining the difference.

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 

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C-5
income on Schedule C. Enter your statutory employee income from box 1 of 

Form W-2 on line 1 of Schedule C and 

check the box on that line. Social security 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 include full-time life insurance agents, 

certain agent or commission drivers and 

traveling salespersons, and certain 

homeworkers.

If you had both self-employment income and statutory employee income, 

you must file two Schedules C. You cannot combine these amounts on a single 

Schedule C.

Note. Statutory employees information doesn’t apply to Form 1040-SS filers.

Qualified joint ventures should 

report rental real estate income 

not subject to self-employment 

tax on Schedule E. See Qualified Joint 

Venture, earlier, and the Instructions for 

Schedule E.

Installment sales. Generally, the installment method cannot be used to report income from the sale of (a) personal 

property regularly sold under the installment method, or (b) real property held 

for resale to customers. But the installment method can be used to report income from sales of certain residential 

lots and timeshares if you elect to pay 

interest on the tax due on that income after 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.

If you use the installment method, attach 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.

Line 2

Report your sales returns and allowances as a positive number on line 2. A 

sales return is a cash or credit refund 

you gave to customers who returned defective, damaged, or unwanted products. 

CAUTION

!

A sales allowance is a reduction in the 

selling price of products, instead of a 

cash or credit refund.

Line 6

Report on line 6 business income not reported elsewhere in Part I. Be sure to include amounts from the following.

• Finance reserve income.

• Scrap sales.

• Bad debts you recovered.

• Interest (such as on notes and 

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, 

renewable diesel, and sustainable 

aviation fuel claimed on line 11 of Form 

8864.

• Credit for federal tax paid on fuels 

claimed on your 2022 Form 1040 or 

1040-SR.

• Prizes and awards related to your 

trade or business.

• Amounts you received in your 

trade or business as shown on Form 

1099-PATR.

• 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.

Note. A credit is available only if the 

leave was taken after March 31, 2020, 

and before October 1, 2021, and only after the qualified leave wages were paid, 

which might under certain circumstances not occur until a quarter after September 30, 2021, including quarters during 2023. Accordingly, all lines related 

to qualified sick and family leave wages 

remain on the employment tax returns 

for 2023.

• Any amount of credit for COBRA 

premium assistance. See your Form(s) 

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.

If the business use percentage of any 

listed property (defined under Line 13, 

later) dropped to 50% or less in 2023, 

report on this line any recapture of excess 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.

Part II. Expenses

Capitalizing costs of producing property and acquiring property for resale. 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 expenses 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 capitalization rules.

Exception for a small business taxpayer. A small business taxpayer (defined later under Part III) is not required 

to capitalize certain expenses to inventory or other property. See Pub. 538 for 

more details.

Exception for creative property. If 

you are a freelance artist, author, or photographer, you may be exempt from the 

capitalization rules. However, your personal efforts must have created (or reasonably be expected to create) the property. This exception does not apply to 

any expense related to printing, photographic plates, motion picture films, videotapes, or similar items. These expenses are subject to the capitalization rules. 

For details, see Uniform Capitalization 

Rules in Pub. 538.

C-6
Line 9

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 simultaneously in your business (such as in 

fleet operations). You can’t use actual 

expenses for a leased vehicle if you previously used the standard mileage rate 

for that vehicle.

You can take the standard mileage 

rate for 2023 only if you:

• 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.

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.

• Add to this amount your parking 

fees and tolls; and

• Enter the total on line 9. Do not 

deduct depreciation, rent or lease payments, or your actual operating expenses.

If you deduct actual expenses:

• Include on line 9 the business portion of expenses for gasoline, oil, repairs, insurance, license plates, etc.; and

• Show depreciation on line 13 and 

rent or lease payments on line 20a.

For details, see chapter 4 of Pub. 463.

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.

1. Complete Schedule C, Part IV, if 

(a) you are claiming the standard mileage 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 additional vehicle.

2. Complete Form 4562, Part V, if 

you are claiming depreciation on your 

vehicle or you are required to file Form 

4562 for any other reason (see Line 13, 

later).

Line 10

Enter the total commissions and fees for 

the tax year. Do not include commissions or fees that are capitalized or deducted elsewhere on your return.

You must file Form 1099-NEC to report certain commissions and fees of 

$600 or more during the year. See the 

Instructions for Forms 1099-MISC and 

1099-NEC for details.

Sales of property. Generally, commissions 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.

Note. A dealer in property is a person 

who regularly sells property in the ordinary course of their trade or business.

For more information on the capitalization of commissions and fees, see the 

examples under Regulations section 

1.263(a)-1(e).

Line 11

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 includible on line 17, 21, 26, or 37. Also, 

do not include salaries and wages paid 

to your employees; instead, see Line 26, 

later.

You must file Form 1099-NEC to report contract labor payments of $600 or 

more during the year. See the Instructions for Forms 1099-MISC and 

1099-NEC for details.

Line 12

Enter your deduction for depletion on 

this line. If you have timber depletion, 

attach Form T (Timber). See chapter 7 

of Pub 225 for additional details.

Depletion is generally an item 

of tax preference under the Alternative Minimum Tax (AMT). 

See section 57.

CAUTION

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Line 13

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 substantially beyond the tax year. You can also depreciate improvements made to leased 

business property. However, stock in 

trade, inventories, and land are not depreciable. 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 service, 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 Instructions for Form 4562 and Pub. 946 to figure the amount to enter on line 13.

When to attach Form 4562. You must 

complete and attach Form 4562 only if 

you are claiming:

• Depreciation on property placed in 

service during 2023;

• Depreciation on listed property 

(defined later), regardless of the date it 

was placed in service; or

• A section 179 expense deduction.

If you acquired depreciable property 

for the first time in 2023, see Pub. 946.

Listed property. Listed property generally includes but is not limited to:

• Passenger automobiles weighing 

6,000 pounds or less;

• Any other property used for transportation if the nature of the property 

lends itself to personal use, such as motorcycles, pickup trucks, etc.; and

• Any property used for entertainment or recreational purposes (such as 

photographic, phonographic, communication, and video recording equipment).

Exception. Listed property does not 

include photographic, phonographic, 

communication, or video equipment 

used exclusively in your trade or business or at your regular business establishment. For purposes of this exception, 

a portion of your home is treated as a 

regular business establishment only if 

that portion meets the requirements under section 280A(c)(1) for deducting exC-7
penses for the business use of your 

home.

Recapture. See Line 6, earlier, if the 

business use percentage of any listed 

property dropped to 50% or less in 2023.

Line 14

Deduct contributions to employee benefit programs that are not an incidental 

part of a pension or profit-sharing plan 

included on line 19. Examples are accident 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.

You cannot deduct contributions you 

made on your behalf as a self-employed 

person for group-term life insurance.

Do not include on line 14 any contributions 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 instructions for line 17, Schedule 1, contained within the Instructions for Form 

1040.

You must reduce your line 14 deduction by the amount of any credit for 

small employer health insurance premiums determined on Form 8941. See 

Form 8941 and its instructions to determine which expenses are eligible for the 

credit.

Line 15

Deduct premiums paid for business insurance 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 

disability. For details, see Pub. 334, 

chapter 8.

Lines 16a and 16b

Interest allocation rules. The tax treatment of interest expense differs depending on its type. For example, home 

mortgage interest and investment interest are treated differently. “Interest allocation” 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.

Generally, you allocate interest expense 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 interest expenses of this trade or business unless 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 must file Form 8990, figure 

the limit on your business interest expenses on Form 8990 before completing 

lines 16a and 16b. Follow the instructions under How to report, later, but report 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.

If you are a small business taxpayer 

or meet one of the other filing exceptions for Form 8990, follow the instructions under How to report, later, and report all of your deductible interest on 

lines 16a and 16b.

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 institutions for which you received a Form 

1098 (or similar statement). If you did 

not receive a Form 1098, enter the interest on line 16b.

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 example, added to basis. See Pub. 551, under Uniform Capitalization Rules, for 

details.

The Tax Cuts and Jobs Act, section 11043, limited the deduction for mortgage interest paid 

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 received 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 received the Form 1098. In the margin 

next to line 16b, enter “See attached.”

If you paid interest in 2023 that also 

applies to future years, deduct only the 

part that applies to 2023.

Line 17

Include on this line fees charged by accountants and attorneys that are ordinary 

and necessary expenses directly related 

to operating your business.

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.

For more information, see Pub. 334.

Line 18

Include on this line your expenses for

office supplies and postage.

Line 19

Enter your deduction for the contributions you made for the benefit of your 

employees to a pension, profit-sharing, 

or annuity plan (including SEP, SIMPLE, and SARSEP plans described in 

Pub. 560). If the plan included you as a 

self-employed person, enter the contributions made as an employer on your 

behalf on Schedule 1 (Form 1040), 

line 16, not on Schedule C.

This deduction may be subject to limitations. For more information on potential limitations, see Pub. 560.

In most cases, you must file the applicable form listed below if you maintain a pension, profit-sharing, or other 

funded-deferred compensation plan. The 

filing requirement is not affected by 

CAUTION

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C-8
whether or not the plan qualified under 

the Internal Revenue Code, or whether 

or not you claim a deduction for the current tax year. There is a penalty for failure to timely file these forms.

Form 5500-EZ. File this form if you 

have a one-participant retirement plan 

that meets certain requirements. A 

one-participant plan is a plan that covers 

only you (or you and your spouse).

Form 5500-SF. File this form electronically with the Department of Labor (at 

efast.dol.gov) if you have a small plan 

(fewer than 100 participants in most cases) that meets certain requirements.

Form 5500. File this form electronically 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.

For details, see Pub. 560.

Lines 20a and 20b

If you rented or leased vehicles, machinery, 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.

Enter on line 20b amounts paid to 

rent or lease other property, such as office space in a building.

Line 21

Deduct the cost of incidental repairs and 

maintenance that do not add to the property'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.

Line 22

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.

You can also deduct the cost of 

books, professional instruments, equipment, etc., if you normally use them 

within a year. However, if their usefulness extends substantially beyond a 

year, you must generally recover their 

costs through depreciation.

Line 23

You can deduct the following taxes and 

licenses on this line.

• State and local sales taxes imposed 

on you as the seller of goods or services. 

If you collected this tax from the buyer, 

you must also include the amount collected in gross receipts or sales on 

line 1.

• 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 licenses, such as liquor licenses, may 

have to be amortized. See the Instructions for Form 4562, Depreciation and 

Amortization, for more information on 

amortization.

• 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 unemployment insurance fund or disability benefit 

fund if they are considered taxes under 

state law.

Do not deduct the following.

• Federal income taxes, including 

your self-employment tax. However, 

you can deduct one-half of your self-employment 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).

• Estate and gift taxes.

• Taxes assessed to pay for improvements, such as paving and sewers.

• Taxes on your home or personal 

use property.

• State and local sales taxes on property 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 

governments. These taxes are not included 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.

• Other taxes and license fees not related to your business.

Do not reduce your deduction 

for social security and Medicare taxes by the nonrefundable 

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.

Line 24a

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, regardless of where you maintain your 

family home. You can’t deduct expenses 

paid or incurred in connection with employment away from home if that period 

of employment exceeds 1 year. Also, 

you cannot deduct travel expenses for 

your spouse, your dependent, or any other 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.

Do not include expenses for meals on 

this line. Instead, see Line 24b, later. Do 

not include entertainment expenses on 

this line.

Instead of keeping records of your 

actual incidental expenses, you can use 

an optional method for deducting incidental 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, lodging taxes, or the costs of telegrams or 

telephone calls. You cannot use this 

CAUTION

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C-9
method on any day that you use the 

standard meal allowance (as explained 

under Line 24b, later).

You can’t deduct expenses for attending a convention, seminar, or similar 

meeting held outside the North American 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 employers and employees. Other rules apply to luxury water travel.

For details on travel expenses, see 

chapter 1 of Pub. 463.

Line 24b

Enter your deductible business meal expenses. 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 

allowance. See Amount of deduction, 

later, for the percentage that applies to 

your actual meal expenses or standard 

meal allowance. In most cases, the percentage is 50%.

Do not include entertainment expenses on this line.

Business meal expenses. You can deduct a percentage of the actual cost of a 

meal if the following conditions are met.

• The meal expense was an ordinary 

and necessary expense in carrying on 

your trade or business.

• The expense was not lavish or extravagant under the circumstances.

• You or your employee was present 

at the meal.

• The meal was provided to a current or potential business customer, client, consultant, or similar business contact.

• In the case of food or beverages 

provided during or at an entertainment 

event, the food and beverages were purchased separately from the entertainment, or the cost of the food and beverages was stated separately from the cost 

of the entertainment on one or more 

bills, invoices, or receipts.

You cannot avoid the entertainment disallowance rule by inflating the amount charged for 

food and beverages.

CAUTION

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See Notice 2021-25 for examples and 

more information. Notice 2021-25 is 

available at IRS.gov/irb/

2021-17_IRB#NOT-2021-25.

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 expenses. 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.

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 continental United States by going to the 

General Services Administration's website at GSA.gov/travel/plan-book/perdiem-rates/mie-breakdown.

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/

2021-38_IRB#NOT-2021-52.

Amount of deduction. For business 

meals, you can deduct 50% of your business meal expenses, including meals incurred while away from home on business. 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 during, or incident to, any period of duty for 

which those limits are in effect. Individuals subject to the DOT hours of service 

limits include the following.

• Certain air transportation workers 

(such as pilots, crew, dispatchers, mechanics, and control tower operators) 

who are under Federal Aviation Administration regulations.

• Interstate truck operators who are 

under DOT regulations.

• Certain merchant mariners who are 

under Coast Guard regulations.

However, you can fully deduct meals 

and incidentals furnished or reimbursed 

to an employee if you properly treat the 

expense as wages subject to withholding. You can also fully deduct meals and 

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 chapter 5 of Pub. 15 (Circular E), Employer’s 

Tax Guide, for details and other exceptions. See also chapter 8 of Pub. 334.

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 recordkeeping requirements.

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.

Line 26

Enter the total salaries and wages for the 

tax year reduced by the amount of the 

following credit(s), if applicable.

• Work Opportunity Credit (Form 

5884).

• Empowerment Zone Employment 

Credit (Form 8844).

• Credit for Employer Differential 

Wage Payments (Form 8932).

• Employer Credit for Paid Family 

and Medical Leave (Form 8994).

Do not reduce your deduction for any 

portion of a credit that was passed 

through to you from a pass-through entity. See the instructions for the credit 

form for more information.

Do not include salaries and wages deducted elsewhere on your return or 

amounts paid to yourself.

C-10
If you provided taxable fringe 

benefits to your employees, 

such as personal use of a car, 

do not deduct as wages the amount applicable to depreciation and other expenses 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.

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.

Line 30

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 simplified method.

If you have a business use of another 

home, you can’t use the simplified method 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.

If you are not using the simplified method to determine the 

amount of expenses you may 

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.

Simplified method. The simplified 

method is an alternative to the calculation, allocation, and substantiation of actual expenses. In most cases, you will 

figure your deduction by multiplying the 

area (measured in square feet) used regularly and exclusively for business, regCAUTION

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TIP

ularly for daycare, or regularly for storage of inventory or product samples, by 

$5. The area you use to figure your deduction cannot exceed 300 square feet. 

You cannot use the simplified method to 

figure a deduction for rental use of your 

home.

Electing to use the simplified method. You choose whether or not to use 

the simplified method each tax year. 

Make the election by using the simplified 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 method 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 Commissioner.

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 election, but not for the same portion of the 

home.

If you conduct more than one business that qualifies for this deduction in 

your home, your election to use the simplified method applies to all your qualified 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 deduction. 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.

If you used your home for more 

than one business, you will 

need to file a separate Schedule C for each business. Do not combine 

your deductions for each business use 

on a single Schedule C.

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 business 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 deducCAUTION

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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 

area changes (for simplified method only), later, and Columns (a) and (b) in the 

Instructions for Form 8829.

Other requirements must still be 

met. You must still meet all the use requirements to claim a deduction for 

business use of the home. The simplified 

method is only an alternative to the calculation, allocation, and substantiation 

of actual expenses. The simplified method 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.

Gross income limitation. The 

amount of your deduction is still limited 

to the gross income derived from qualified 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 difference to another tax year.

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. Instead, the actual expenses from Form 

8829 that were not allowed will be carried over to the next year that you use 

actual expenses to figure your deduction.

Depreciation of home. You cannot 

deduct any depreciation (including any 

additional first-year depreciation) or section 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 deduction allowable for that portion of the 

home for that year is deemed to be zero.

C-11
Simplified Method Worksheet Keep for Your Records

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 

Simplified Method Worksheet .................................................................

2.

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.

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Although you cannot deduct 

any depreciation or section 179 

expense for the portion of your 

home that is a qualified business use because 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 business use of your home.

Figuring your allowable expenses for 

business use of the home. You will figure the deduction using Form 8829 or 

the Simplified Method Worksheet, or 

both.

You may not use the simplified 

method and also file Form 

8829 for the same qualified 

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 information about claiming this deduction 

using Form 8829, see the Instructions 

for Form 8829 and Pub. 587.

Using the simplified method. Use 

the Simplified Method Worksheet in 

these instructions to figure your deduction for a qualified business use of your 

home if you are electing to use the simplified method for that home.

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CAUTION

!

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 deduction as the other person. You must allocate the shared space between you and 

the other person in a reasonable manner.

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 portion 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.

Part-year use or area changes (for 

simplified method only). If your qualified business use was for a portion of the 

tax year (for example, a seasonal business, 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 allowable square footage. You figure the average monthly allowable square footage 

by adding the amount of allowable 

square feet you used in each month and 

dividing the sum by 12.

When determining the average 

monthly allowable square footage, you 

cannot take more than 300 square feet 

into account for any one month. Additionally, if your qualified business use 

was less than 15 days in a month, use -0- 

for that month.

Example 1. Finley files a federal income 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 December divided by the number of months in 

the year ((300 + 300 + 300 + 300 + 

300)/12)).

Example 2. Riley files a federal income 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 expanded 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 

Daycare Facility Worksheet (for simplified method) Keep for Your Records

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.

TIP

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.

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.

C-13
square footage is 150 square feet (100 

square feet for May through July and 

300 square feet for August through December divided by the number of 

months in the year ((100 + 100 +100 + 

300 + 300 + 300 + 300 + 300)/12)).

Example 3. Carter files a federal income 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, Carter moved to a new home and immediately began using 200 square feet of the 

new home for the same qualified business use. Using the simplified method to 

deduct expenses for the qualified business use for the previous home, Carter’s 

average monthly allowable square footage 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.

Once you have determined your allowable square footage, enter the result 

on line 2 of the Simplified Method 

Worksheet.

If you moved during the year, 

your average allowable square 

footage will generally be less 

than 300.

You can use the Area Adjustment Worksheet in Pub. 587 to 

help you determine the allowable 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.

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 Worksheet on line 30.

If you itemize your deductions on 

Schedule A, you may deduct your mortgage interest, real estate taxes, and casualty losses on Schedule A as if you did 

CAUTION

!

TIP

not use your home for business. You 

cannot deduct any excess mortgage interest, excess real estate taxes, or excess 

casualty losses on Schedule C for this 

home.

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).

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. Combine 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 Schedule C for that business.

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 instructions under Line 32, later, and the 

Instructions for Form 8582. After applying those rules, the amount on line 31 

will be your loss, and it may be smaller 

than the amount you figured by subtracting line 30 from line 29.

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 activity losses, subtract line 30 from line 29. 

The result is your net profit.

If your gross income is more than 

your expenses (including the expenses 

you report on line 30), and you have prior year unallowed passive activity losses, don’t enter your net profit on line 31 

until you have figured the amount of prior 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 entering "PAL" to the left of the entry 

space.

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.

Rental real estate activity. Unless 

you are a qualifying real estate professional, 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.

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 business loss. Use Form 461 to figure your excess business loss.

Individuals. Enter your net profit or 

loss on line 31 and include it on Schedule 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 

employees or Notary public, later.

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 Instructions for Schedule SE for information on international social security 

agreements. However, if you are a statutory employee or notary public, see Statutory employees or Notary public, later.

Trusts and estates. Enter the net 

profit or loss on line 31 and include it on 

Form 1041, line 3.

Statutory employees. Enter your net 

profit or loss on line 31 and include it on 

Schedule 1 (Form 1040), line 3. However, do not report this amount on Schedule SE, line 2. If you were a statutory 

employee and you are required to file 

Schedule SE because of other self-employment income, see the Instructions 

for Schedule SE.

Notary public. Do not enter your net 

profit from line 31 on Schedule SE, 

line 2, unless you are required to file 

CAUTION

!

C-14
Schedule SE because you have other 

self-employment income. See the Instructions for Schedule SE.

You can deduct one-half of your 

self-employment tax on Schedule 1 (Form 1040), line 15. See 

the Instructions for Schedule SE for details.

Community income. If you and your 

spouse had community income and are 

filing separate returns, see the Instructions for Schedule SE before figuring 

self-employment tax.

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 instructions for Form 1040, 

line 27. Complete all applicable steps plus Worksheet B. If you are required to file Schedule SE, remember to 

enter one-half of your self-employment 

tax in Part 1, line 1d, of Worksheet B.

Line 32

You do not need to complete 

line 32 if line 7 is more than the 

total of lines 28 and 30.

At-risk rules. In most cases, if you 

have a business loss and amounts invested 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.

Check box 32b if you have amounts 

invested in this business for which you 

are not at risk, such as the following.

• 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 property (other than property used in the business), and for which you are not personally responsible to repay. However, there 

is an exception for certain nonrecourse 

financing borrowed by you in connection with holding real property. See the 

Instructions for Form 6198 and Pub. 

925.

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CAUTION

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TIP

• Cash, property, or borrowed 

amounts used in the business (or contributed to the business, or used to acquire the business) that are protected 

against loss by a guarantee, stop-loss 

agreement, or other similar arrangement 

(excluding casualty insurance and insurance against tort liability).

• Amounts borrowed for use in the 

business from a person who has an interest in the business, other than as a creditor, or who is related under section 

465(b)(3)(C) to a person (other than 

you) having such an interest.

Figuring your loss. Before determining 

your loss, check box 32a or 32b to indicate 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.

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 activity loss rules. See Line 31, earlier, for 

how to report your loss.

If you answered “No” on line G, you 

may need to complete Form 8582 to figure your loss to enter on line 31. See the 

Instructions for Form 8582 for details.

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 

loss rules do not apply. See Line 31, earlier, for how to report your loss.

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 

on line 31. See the Instructions for Form 

8582 for details.

If you checked box 32b because 

some investment is not at risk 

and you do not attach Form 

6198, the processing of your return may 

be delayed.

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.

More information. For details, see the 

Instructions for Form 6198 and Pub. 

925.

Part III. Cost of 

Goods Sold

In most cases, if you engaged in a trade 

or business in which the production, purchase, or sale of merchandise was an income-producing factor, you must take 

inventories into account at the beginning 

and end of your tax year.

Exception for small business taxpayers. If you are a small business taxpayer, you can choose not to keep an inventory, but you must still use a method of 

accounting for inventory that clearly reflects 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 material or supplies, or conforms to your financial accounting treatment of inventories. 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 Schedule C.

Small business taxpayer. You qualify 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)).

If your business has not been in existence 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 predecessor entity, include the gross receipts 

of the predecessor entity from the 

3-tax-year period when figuring average 

CAUTION

!

C-15
gross receipts. If your business (or predecessor 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.

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 operations.

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 prepared in accordance with your accounting procedures.

More information. For more information about this exception for small 

businesses using this method of accounting for inventoriable items, see Pub. 

538.

Changing your method of accounting for inventory. If you want to 

change your method of accounting for 

inventory, file Form 3115. For details, 

see Line F, earlier.

Certain direct and indirect expenses may have to be capitalized or included in inventory. 

See Part II, earlier. See Pub. 538 for additional information.

Line 33

Your inventories can be valued at cost, 

the lower of cost or market, or any other 

method approved by the IRS.

Line 33 doesn't apply to filers of 

Form 1040-SS.

Line 35

If you are changing your method of accounting beginning with 2023, refigure 

last year's closing inventory using your 

CAUTION

!

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 explanation and take it into account when 

figuring your section 481(a) adjustment. 

For details, see the example under Line 

F, earlier.

Part IV. Information 

on Your Vehicle

Line 44b

In most cases, commuting is travel between 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 vehicle for business.

Travel that meets any of the following conditions isn't commuting; it is 

considered deductible business travel.

• You have at least one regular work 

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 

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.

• Your home is your principal place 

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 

temporary and regardless of distance.

Line 47

Specific recordkeeping rules apply to 

car or truck expenses. For more information about what records you must 

keep, see Pub. 463.

You may maintain written evidence 

by using an electronic storage system 

that meets certain requirements. For 

more information about electronic storage systems, see Pub. 583.

Part V. Other 

Expenses. Line 48

Include all ordinary and necessary business 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 penalties paid to a government for violating 

any law. For details on business expenses, see Pub. 334, chapter 8.

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 facilities;

• Amounts paid for research and experimentation;

• Amounts paid to acquire, protect, 

expand, register, or defend trademarks 

or trade names; or

• Goodwill and certain other intangibles.

In most cases, you cannot amortize 

real property construction period interest 

and taxes. Special rules apply for allocating interest to real or personal property produced in your trade or business.

For a complete list, see the instructions for Form 4562, Part VI.

At-risk loss deduction. Any loss from 

this business that was not allowed last 

year because of the at-risk rules is treated as a deduction allocable to this business in 2023.

Bad debts. Include debts and partial 

debts from sales or services that were included in income and are definitely 

known to be worthless. If you later collect a debt that you deducted as a bad 

debt, include it as income in the year 

collected. For details, see Pub. 334, 

chapter 8.

Business startup costs. If your business began in 2023, you can elect to deduct up to $5,000 of certain business 

startup costs. The $5,000 limit is reduced (but not below zero) by the 

amount by which your total startup costs 

exceed $50,000. Your remaining startup 

C-16
costs can be amortized over a 

180-month period, beginning with the 

month the business began.

For details, see IRS.gov/Newsroom/

Heres-how-businesses-can-deductstartup-costs-from-their-federal-taxes. 

For amortization that begins in 2023, 

complete and attach Form 4562.

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 transportation barriers to individuals with 

disabilities and the elderly. However, 

you cannot take both a credit (on Form 

8826) and a deduction for the same expenditures.

De minimis safe harbor for tangible 

property. Generally, you must capitalize 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 produce certain tangible property if these 

amounts are deducted by you for financial accounting purposes or in keeping 

your books and records.

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 invoice. If you don't have an applicable financial statement, you may use the de 

minimis safe harbor to deduct amounts 

paid for tangible property up to $2,500 

per item or invoice.

Only deduct these amounts as other 

expenses. Don't include these amounts 

on any other line.

For details on making this election 

and requirements for using the de minimis safe harbor for tangible property, 

see chapter 8 of Pub. 334.

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.

Forestation and reforestation costs. 

Reforestation costs are generally capital 

expenditures. However, for each qualified timber property, you can elect to expense up to $10,000 ($5,000 if married 

filing separately) of qualifying reforestation costs paid or incurred in 2023.

You can elect to amortize the remaining costs over 84 months. For amortization that begins in 2023, complete and 

attach Form 4562.

The amortization election and the expense election don’t apply to trusts. For 

details on reforestation expenses, see 

chapter 4 of Pub. 225.

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 complying with these laws and to allow us to 

figure and collect the right amount of 

tax.

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 relating 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 confidential, as required by section 6103.

The time needed to complete and file 

Schedule C (Form 1040) will vary depending on individual circumstances. 

The estimated burden for individual taxpayers 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.

Recordkeeping ......... 3 hr., 36 min.

Learning about the law or the 

form ............... 1 hr., 19 min.

Preparing the form ....... 1 hr., 39 min.

Copying, assembling, and sending 

the form to the IRS ...... 34 min.

If you have comments concerning the 

accuracy of these time estimates or suggestions 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

North American Industry 

Classification System (NAICS).

These codes for the Principal Business or Professional 

Activity classify sole proprietorships by the type of 

activity they are engaged in to facilitate the 

administration of the Internal Revenue Code. These 

six-digit codes are based on the 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 

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.

Note. If your principal source of income is from 

farming activities, you should file Schedule F.

Accommodation, Food 

Services, & Drinking Places

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)

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

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

562000 Waste management & 

remediation services

Agriculture, Forestry, Hunting, & 

Fishing

112900 Animal production (including 

breeding of cats and dogs)

114110 Fishing

113000 Forestry & logging (including 

forest nurseries & timber tracts)

114210 Hunting & trapping

Support Activities for Agriculture & 

Forestry

115210 Support activities for animal 

production (including farriers)

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

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)

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 & airconditioning contractors

238110 Poured concrete foundation & 

structure contractors

238160 Roofing contractors

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

238990 All other specialty trade 

contractors

Educational Services

611000 Educational services (including 

schools, colleges, & 

universities)

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

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)

621320 Offices of optometrists

621340 Offices of physical, 

occupational & speech 

therapists, & audiologists

621111 Offices of physicians (except 

mental health specialists)

621112 Offices of physicians, mental 

health specialists

621391 Offices of podiatrists

621399 Offices of all other 

miscellaneous health 

practitioners

621400 Outpatient care centers

621900 Other ambulatory health care 

services (including ambulance 

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

624100 Individual & family services

624310 Vocational rehabilitation 

services

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

Motion Picture & Sound Recording

512100 Motion picture & video 

industries (except video rental)

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.

324100 Petroleum & coal products mfg.

326000 Plastics & rubber products mfg.

331000 Primary metal mfg.

323100 Printing & related support 

activities

313000 Textile mills

314000 Textile product mills

336000 Transportation equipment mfg.

321000 Wood product mfg.

339900 Other miscellaneous mfg.

Chemical Manufacturing

325100 Basic chemical mfg.

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.

Mining

212110 Coal mining

211120 Crude petroleum extraction

212200 Metal ore mining

211130 Natural gas extraction

212300 Nonmetallic mineral mining & 

quarrying

213110 Support activities for mining

Other Services

Personal & Laundry Services

812111 Barber shops

812112 Beauty salons

812220 Cemeteries & crematories

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

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

Professional, Scientific, & 

Technical Services

541100 Legal services

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

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

532282 Video tape & disc rental

532289 Other consumer goods rental

Religious, Grantmaking, Civic, 

Professional, & Similar 

Organizations

813000 Religious, grantmaking, civic, 

professional, & similar 

organizations

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

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

459410 Office supplies & stationery 

retailers

459910 Pet & pet supplies retailers

459510 Used merchandise retailers

459990 All other miscellaneous retailers 

(including tobacco, candle, & 

trophy retailers)

Nonstore Retailers

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.

xx For example, establishments 

primarily selling prescription 

and non-prescription drugs, 

select PBA code 456110 

Pharmacies & Drug Retailers.

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

493100 Warehousing & storage (except 

leases of miniwarehouses & 

self-storage units)

Utilities

221000 Utilities

Wholesale Trade

Merchant Wholesalers, Durable Goods

423200 Furniture & home furnishing

423700 Hardware, & plumbing & 

heating equipment & supplies

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

424300 Apparel, piece goods, & notions

C-19
North American Industry Classification System (NAICS). (Continued)

424800 Beer, wine, & distilled alcoholic 

beverages

424920 Books, periodicals, & 

newspapers

424600 Chemical & allied products

424210 Drugs & druggists' sundries

424500 Farm product raw materials

424910 Farm supplies

424930 Flower, nursery stock, & florists' 

supplies

424400 Grocery & related products

424950 Paint, varnish, & supplies

424100 Paper & paper products

424700 Petroleum & petroleum products

424940 Tobacco products & electronic 

cigarettes

424990 Other miscellaneous nondurable 

goods

Wholesale Trade Agents & 

Brokers

425120 Wholesale trade agents & 

brokers

999000 Unclassified establishments 

(unable to classify)

C-20