Schedule C has a reputation problem that comes from its vocabulary, not its arithmetic. Gross receipts, cost of goods sold, tentative profit: the words are unfamiliar, and the form is laid out for an accountant's eye rather than a first-timer's. The maths itself is subtraction in two places.
So this page walks the 2025 form in order and uses the form's own labels, quoted, rather than paraphrases. Everything below is readable on the form and the line instructions published on irs.gov, and the sources are listed at the end.
What Schedule C Is
The form's full title is "Profit or Loss From Business (Sole Proprietorship)", capital F, and it is an attachment to your Form 1040. It exists to answer two questions the 1040 cannot: what did the business earn, and what did it spend.
The bottom line is line 31, "Net profit or (loss)". Everything above it is the working, and the working is organised into parts: income, expenses, and three further parts that only apply to particular businesses.
Before any of that, lines A through J ask for the business's identity: a description of the activity on line A, a six-digit business activity code on line B, the name and address, an employer ID number "if any", the accounting method on line F, whether you materially participated, when the business started, and two questions on lines I and J about whether you paid anyone in a way that requires a Form 1099 and whether you will file those.
Who Files It, and the $400 Question
A sole proprietor files Schedule C. That includes a single-member LLC that has not elected to be treated as a corporation, and it includes anyone freelancing, driving, selling or contracting without a partnership or corporation around the work. There is no size threshold for the form itself, no requirement for an LLC, and no requirement for a business bank account.
The number people quote is $400, and it belongs to a different question. The IRS self-employment tax topic puts it this way: you usually must pay self-employment tax if you had net earnings from self-employment of $400 or more, and the self-employed tax centre adds that you have to file an income tax return if those net earnings were $400 or more, and that below that figure you still file if you meet another filing requirement. For someone with a W-2 job, that last clause is the one that applies, so the side hustle's numbers go on a return that was being filed anyway.
Part I: Income, Lines 1 to 7
Seven lines, and only two of them are usually filled in by hand:
- Line 1, "Gross receipts or sales." The money the business took in. The instructions note that if this income was reported to you on a W-2 with the statutory employee box checked, there is a box to tick.
- Line 2, "Returns and allowances." Refunds you gave back to customers.
- Line 3 is subtraction: line 1 minus line 2.
- Line 4, "Cost of goods sold (from line 42)." Only relevant if you sell goods, and the number comes from Part III on the back of the form.
- Line 5, "Gross profit. Subtract line 4 from line 3."
- Line 6, "Other income, including federal and state gasoline or fuel tax credit or refund."
- Line 7, "Gross income. Add lines 5 and 6." This is the figure the expense section works against.
Part II: Expenses, Lines 8 to 31
The part opens with a rule that is easy to skim past: "Enter expenses for business use of your home only on line 30." Everything from line 8 to line 27b is business expenses other than the home. The labels, as printed:
| Line | Label on the form |
|---|---|
| 8 | Advertising |
| 9 | Car and truck expenses |
| 10 | Commissions and fees |
| 11 | Contract labor |
| 12 | Depletion |
| 13 | Depreciation and section 179 expense deduction |
| 14 | Employee benefit programs |
| 15 | Insurance (other than health) |
| 16a / 16b | Interest, split into mortgage paid to banks and other |
| 17 | Legal and professional services |
| 18 | Office expense |
| 19 | Pension and profit-sharing plans |
| 20a / 20b | Rent or lease, split into vehicles, machinery and equipment, and other business property |
| 21 | Repairs and maintenance |
| 22 | Supplies (not included in Part III) |
| 23 | Taxes and licenses |
| 24a / 24b | Travel, and deductible meals |
| 25 | Utilities |
| 26 | Wages (less employment credits) |
| 27a | Energy efficient commercial bldgs deduction (attach Form 7205) |
| 27b | Other expenses (from line 48) |
| 28 | Total expenses before expenses for business use of home. Add lines 8 through 27b |
| 29 | Tentative profit or (loss). Subtract line 28 from line 7 |
| 30 | Expenses for business use of your home. Do not report these expenses elsewhere. Attach Form 8829 |
| 31 | Net profit or (loss). Subtract line 30 from line 29 |
Two of those labels do quiet work. Line 22 is "Supplies (not included in Part III)", so anything already counted as cost of goods sold does not belong there twice. Line 24b is "Deductible meals", which is a narrower category than meals, and the line instructions are where the limits live.
Lines 28 through 31 are arithmetic. Total the expenses, subtract them from gross income, take the home office costs off last, and line 31 is what remains. Because home office costs are subtracted last, they cannot create a loss on their own, which is the mechanical reason that deduction is treated differently from the rest.
Where Line 31 Goes
Line 31 is quoted into two other forms, and both of them lead to the 1040:
- Schedule 1, line 3, "Business income or (loss). Attach Schedule C." From Schedule 1 the total travels to the 1040 as additional income.
- Schedule SE, line 2, "Net profit or (loss) from Schedule C, line 31". Schedule SE computes self-employment tax, and its line 12 is where the tax itself lands: "Self-employment tax. Add lines 10 and 11. Enter here and on Schedule 2 (Form 1040), line 4."
So one number from one line of Schedule C feeds your income tax through Schedule 1 and your Social Security and Medicare contribution through Schedule SE, which is why an error on line 31 is more expensive than an error further up the form.
Parts III, IV and V, and When They Matter
Part III, Cost of Goods Sold, runs from line 33 to line 42 and is for businesses that sell goods. Line 4 of the income section takes its number from line 42 here. If you sell services, the part stays empty.
Part IV, Information on Your Vehicle, opens with its own condition: "Complete this part only if you are claiming car or truck expenses on line 9 and are not required to file Form 4562 for this business." The line 13 instructions tell you whether you need Form 4562 at all, and the part itself asks for the vehicle's details and the mileage figures behind the deduction on line 9.
Part V, Other Expenses, is where an expense goes when it fits none of the printed labels: its header says to list "business expenses not included on lines 8-27a, or line 30". Line 48 totals them, and line 48's instruction sends the total back to line 27b. An expense that never appears in Part V cannot appear on line 27b.
Four Things the Form Tells You in Its Own Labels
- Home office costs go on line 30, not in Part II. The part header states it, and the placement changes the outcome, because line 30 comes after tentative profit.
- "Supplies (not included in Part III)" exists to stop a double deduction for inventory already counted in cost of goods sold.
- "Deductible meals" is not the same as "meals". The label points at the line instructions because the limits are there.
- Line 27b says "(from line 48)". The number has to come through Part V first, listed and totalled, before it can be claimed.
More Than One Business
A side hustle that pays you from two unrelated activities is two businesses on paper. The line A instructions state it plainly: "If you owned more than one business, complete a separate Schedule C for each business." That means two sets of income lines, two expense sections, and two line 31 figures, which then total on Schedule 1.
It also means the loss rules apply per business rather than in aggregate, which is the part that surprises people who run one thing at a profit and another at a loss and expect the two to cancel out without explanation.
Frequently Asked Questions
Do I need an EIN to file a Schedule C?
Usually not, and the instructions say what to do about it: enter on line D the EIN issued to you on Form SS-4, and if you do not have one, leave line D blank. The same paragraph lists who does need one, which is a business with a qualified retirement plan, one required to file employment, excise, alcohol, tobacco or firearms returns, or a payer of gambling winnings. Do not put your Social Security number on line D: the instruction rules that out explicitly, and your SSN goes on the 1040 itself.
What happens if my side hustle lost money?
Schedule C handles losses, and the form makes you answer a question about them. If line 31 is a loss you go to line 32 and check which box describes your investment in the activity. Checking 32a has a specific instruction attached: enter the loss on both Schedule 1, line 3, and on Schedule SE, line 2. Checking 32b means you must attach Form 6198 and the loss may be limited.
Why can’t I put my home office costs with the other expenses?
Because the form says so in the header of Part II: "Enter expenses for business use of your home only on line 30." Home office costs come after tentative profit, on line 30, with Form 8829 attached, which is also why they cannot turn a profit into a loss the way other expenses can.
When do I have to fill in Part III?
When you sold goods rather than services. Part III is Cost of Goods Sold, lines 33 to 42, and line 4 of the income section pulls its number from line 42 of that part. A freelancer with no inventory leaves it empty, which is most of this site’s readers.
How many Schedule Cs do I file?
One for each business. The line A instructions state it directly: "If you owned more than one business, complete a separate Schedule C for each business." A rideshare side hustle and a design side hustle are two businesses with two sets of books, even when they share one bank account.
Do I file Schedule C if I made less than $400?
The $400 figure is the threshold for self-employment tax rather than for the form. The IRS says you usually must pay self-employment tax if you had net earnings from self-employment of $400 or more, and that you have to file a return if those earnings were $400 or more. Below it you still report the income on your return if you meet another filing requirement, which for most people with a W-2 job means they file anyway.
Sources
Line labels, part headers and quoted wording were read from these documents on September 28, 2026.
- Schedule C (Form 1040), 2025, the form itself, for every line label and part header quoted above, the line 30 rule, the line 32 loss branch and the separate-Schedule-C instruction on line A
- Instructions for Schedule C, for the accounting method guidance on line F, the line 13 rule on when Form 4562 is required, and the business activity code list, which includes 711510 for independent artists, writers and performers, 492000 for couriers and messengers, and 812990 for all other personal services
- IRS, self-employment tax topic, for the $400 threshold and the statement that the amount subject to self-employment tax is generally 92.35% of net earnings
- IRS, self-employed individuals tax center, for the filing requirement at $400 of net earnings and the note about filing below it when another requirement applies
- Schedule 1 (Form 1040) and Schedule SE (Form 1040), for the lines that receive Schedule C's line 31 and for the destination of the self-employment tax
For the tax that line 31 sets in motion, see self-employment tax explained. For where the figures come from during the year, see tracking income and expenses.
