Ultimate Guide to IRS Schedule C Tax Deductions & Expenses For Small Business Owners

stack of receiptsIf you run a small business, perform freelance work, or have other side income, you probably know exactly what you earn – but you may not be keeping a close eye on what you’re spending. And properly tracking the money you spend to run your business is incredibly important come tax time, especially if you’re to get the most out of your tax returns.

Take a look at the following guide to Schedule C deductions, and you may find that you’re missing out on some key tax deductions for self-employed freelancers and small business owners.


The expenses for all forms of advertising can be placed under line 8. This essentially includes anything you did to earn new business or increase sales to past customers that can’t be categorized elsewhere.

Some examples of deductible advertising expenses include:

  1. Purchased email lists for sales
  2. Manufacturing expenses of promotional items such as pens, calculators, and notepads
  3. Printing costs for banners
  4. Online advertising or website costs

Vehicles & Machinery

The use of various vehicles and machinery is often required to run a business. Be sure to keep an eye on how much you spend in these areas throughout the year so that you can make deductions later:

  • Cars and Trucks. Line 9 can be used to deduct either the actual expenses of operating your car or truck (such as gas and oil, repairs, insurance, and tires) or the standard mileage rate, which for tax year 2015 is 57.5 cents per mile. There are complicated rules about switching between taking actual expenses and taking mileage for each car. Therefore, if you have more than one vehicle, it’s best to pick one and stick with it. Keep in mind, if the vehicle is also for personal use, you must only deduct the portion of miles that were driven for business purposes over the course of the year. You also can’t use mileage if you use your car for hire (such as taxi service) – you can only take actual expenses. The same applies if you are using five or more cars at once. Whether you take actual expenses or the mileage deduction, you can always deduct parking fees and tolls.
  • Rental or Lease of Vehicles, Machinery and Equipment. If you leased any equipment or vehicles, you can deduct the cost on line 20. If you leased a car for 30 days or more for business purposes, see the section on leasing a car in Publication 463 for guidance. This is also an area where you may want to get an accountant involved.

Wages, Commissions & Fees

If you run a small business, you may have to hire people for various tasks. Some of these may be regular, full-time employees. Others might be contract workers or consultants. The good thing is, you can claim the money you spend paying these people.

  • Wages. You can deduct all the money you paid to employees as wages by using line 26. However, you can’t deduct money you paid to yourself or any money deducted elsewhere in your return. You should also subtract any amounts you received as a credit from the Work Opportunity Credit, Empowerment Zone and Renewal Community Employment Credit, Indian Employment Credit, or Credit for Employer Differential Wage Payments. Make sure that anyone whose wages are included on this line receives a W-2 from you as well.
  • Independent Contractors. Payments to employees eligible to receive a 1099 can be claimed on line 11. You can also claim the payments made to those contractors you paid less than the $600 requirement for a 1099.
  • Legal, Accounting or Professional Services. If you used the services of a tax lawyer, accountant, doctor, graphic designer, or other professional, their fees can be deducted on line 17. This refers to companies who gave you a service (such as a new logo) versus companies who gave you a physical good (such as business cards with the new logo). If you have an accountant, the fees they charged specifically for tax preparation can either be deducted as part of your Schedule A itemized deductions, or they can be included here.
  • Commissions and Fees. Line 10 is a sort of catchall category for any money you paid to other businesses or individuals for services. An example might be commissions you paid to salespeople. If it doesn’t fit plausibly under any of the other categories, you may include it here.

Depreciation and Section 179 Expense Deduction

Look no further than line 13 if you are interested in depreciating items. “Depreciation” refers to deducting the cost of a large purchase in chunks over several years instead of in one lump sum in a single year. You must begin depreciating the cost of the item in either the year you bought it or the year you started using it.

The Section 179 Expense Deduction allows you to deduct the full value of most tangible items in a single year instead of spreading it out. If you are depreciating any items, see Publication 946 for more information.

Employee Benefit Programs

Since you are self-employed, you can deduct your own accident, health, or life insurance premiums on line 29 of your 1040. You can also deduct premiums you paid for employees on line 14 of your Schedule C. This includes things such as health insurance, life insurance, or childcare assistance programs.

Contributions you made on your employees’ behalf to pension or retirement plans can be deducted on line 19. You also need to file an additional form that must be filed electronically from now on. Click here for a listing of forms.

Insurance (Other Than Health)

You can deduct the cost of any insurance you carry strictly to protect the business (such as general liability business insurance) on line 15. If you have a home office and pay renters’ insurance or homeowners’ insurance, don’t deduct it here – instead, deduct that as part of your home office deduction.

Interest Paid

Do you hold a mortgage on any property for business use? Do you have a loan on your personal home that funded your business? You can deduct the interest you paid (the total is listed on the 1098 form you receive from your lender) for these in line 16a. Just remember, if someone else helped pay the loan, you must split the deduction with them.

Interest paid on other business loans, as well as for small business credit cards, can be deducted via line 16b.

Property Expenses

Maintaining the property where your business is located can add up throughout the year. Luckily, you can deduct these costs.

  • Rent or Lease of Other Business Property. This one is pretty straightforward. On line 20b, you can deduct any amount you paid in renting or leasing office space, warehouse space, or other real estate.
  • Repairs and Maintenance. Line 21 covers any costs incurred in repairing or maintaining your machinery, property, or buildings that don’t actually add to its value. If it adds to value, or you are restoring something unusable to a usable state, or you are replacing something, you cannot deduct those costs here. This would include expenses such as paying a plumber to fix the bathroom in your deli, but not paying a plumber to install an additional sink in the bathroom.
  • Utilities. Line 25 covers any utility payments your business makes (separate from those you may pay with your rent or lease) such as electricity or gas. Phone service is also considered a utility. If you take the home office deduction, you may include phone service either here or there, but not in both.

Office Expenses

Expenses incurred through the purchase of office supplies – such as postage, paper, envelopes and pens – can be claimed on line 18. Other miscellaneous supplies the business consumes can be claimed on line 22. Examples of these might be toilet paper, cleaning supplies, coffee for employees and customers, small hand tools, or first aid kits.

Items such as technical manuals or small equipment that will need to be replaced every couple of years can also be deducted here. This line is something of a catchall, and therefore you should make an effort to ensure nothing very expensive ends up in this category.

Taxes & Licenses

On line 23, input the sales taxes you have paid as the seller of goods or services (however, if you collected these taxes directly from the buyer, those amounts must be included in gross receipts on line 1).

Other deductions that fall here include:

  1. Licenses or regulatory fees (Liquor licenses may need to be amortized due to cost and duration)
  2. Federal Unemployment Tax
  3. Social Security and Medicare taxes paid for your employees
  4. Real estate taxes for your personal for your business holdings

You cannot deduct federal income taxes here, although you can deduct half your self-employment tax on your 1040, line 27. You also can’t deduct estate or gift taxes or assessment taxes for improvements to your property. Note that you can deduct sales taxes that you pay on items for use in your business, but you should add those taxes to the item’s cost, and not separate it out here.

Travel, Meals & Entertainment

  • Business Travel. If you go on a business trip, your hotel, plane ticket, taxi fares, parking, and tips for the bellboy, are all deductible using line 24a. You must keep your receipts for all these items, as this is one area that the IRS frequently audits. You can’t deduct travel outside North America for a business convention or other meeting unless the convention is directly related to your business and there’s a very good reason for it to be held outside the continent.
  • Business Meals and Entertainment. Since, presumably, you would need to eat one way or the other, you may deduct only 50% of the cost of meals consumed for business purposes on line 24b. This includes meals that you take clients to. “Lavish or extravagant” meals are not deductible, though the IRS does not specify exactly how big the steak may be. You or an employee must be present at the meal – you can’t just send a client out on your ticket. Also, even though you may swear you do all your best deals while attending Major League Baseball games, you are still only permitted to deduct 50% of the cost.

Other Expenses

Line 27 is the real catchall. On the second page of Schedule C, you can list “other expenses.” You still need to put them into categories, but you can put items here if you’re not sure they fit into one of the lines provided.

You’re still required to make sure any expenses you list here are reasonable and necessary for your business. If you truly can’t fit some expenses into any other category, the IRS gives you a place to create some of your own.

Final Word

There are several other things you must keep in mind:

  • What’s included in “other income” on line 6? The line for “other income” is a catchall for money that you received but didn’t exactly earn. This includes bad debts you wrote off in previous years but recovered this year, prize money your business won, any interest paid to you (such as on past due accounts), or any tax refunds or tax credits related to using renewable fuels.
  • If you paid any sales tax on items that you bought for the business, it is actually considered part of the cost of the item. Thus, you deduct them wherever you’re deducting the cost of the item. They aren’t separated, despite the fact that there is a specific line where you deduct taxes.
  • You as the business owner are treated differently from other employees (even if you are self-employed). While there are dedicated lines on Schedule C for your employees’ wages, health insurance,  and retirement plans,  your own costs in these categories are not included.
  • The best way to ensure you get your mileage deduction is to keep a log. You should write down your odometer reading at the beginning of the trip and the end, the date, and what you were doing. IRS agents are easily impressed if you’ve got pages and pages of this stuff.

If you keep these things in mind and track your expenses carefully, you’ll be in good shape to really take advantage of your deductions.

How do you track your expenses throughout the year?

  • http://www.ilovelogs.com Gale Easter

    Absolutely the best information I have found. Thanks!

  • Jamie & Dave Dabrowski

    We have bookmarked this page for future use! Thanks!

  • http://indefinitely.wordpress.com/ Alaska Pete

    I have a question. I do freelance work that requires me to fly to the location once a month. i pay for my plane tickets and the company reimburses me. I’m sure this is probably not a deductible expense since I’m getting reimbursed, but does this mean it is treated just like my wages as reported on the 1099? In other words am I paying taxes on the $$ I’m paying for my plane tickets? If so I should obviously start having the company buy my tickets for me instead of buying them myself and getting reimbursed. Can anyone confirm if this is the case?

    • Kira Botkin

      If they add the plane ticket reimbursement to your 1099, you’re going to just subtract those ticket expenses right off on your schedule C, so it should come out even. But they would also be correct to give you 1099 for just your wages (ie the plane ticket reimbursement money isn’t on there) since reimbursements aren’t wages.

  • We

    How is cash back on a business credit treated for schedule C purposes?

    • Kira Botkin

      The general consensus is that you can ignore it. They are considered to be rebates and not income, and rebates are not taxable. I wouldn’t bother. The IRS has already stated that they are not interested in going after airline miles credit card rewards, and most people get a lot more of those than they do cash.

    • Kira Botkin

      The general consensus is that you can ignore it. They are considered to be rebates and not income, and rebates are not taxable. I wouldn’t bother. The IRS has already stated that they are not interested in going after airline miles credit card rewards, and most people get a lot more of those than they do cash.

  • Caro

    Where would you deduct Copyrights fees, ISBN and Bar Codes on a Schedule C for an author?

    • Kira Botkin

      I’d lump those under “other”. You will get a page to list them out separately, and those are esoteric enough that “other” is a good place to put them.

  • Layla

    My husband built a shop on our property for his tools (owns a small remodeling company). Can we deduct this?

    • Layla

      P.S. and where should we put it?

      • Kira Botkin

        You are going to need an accountant, and more advice than I can give here, because that is an expense that has to be depreciated – it is a capital improvement, which can’t just be written off all in one year. And if by “property” you mean “the land around the house that we live in”, you need a whole other set of tax advice.

  • cindi

    Is there a way to get a copy of my 2010 Schedule C from this irs website?..didn’t find it and the estimated wait to get through with them is 15 minutes but it has been 20. I don’t want to hang up in fear of losing my turn but would like to know if I can get a copy from this website and I overlooked it.

    • Kira Botkin

      I do not know what “this irs website” is referring to, but yes, if you want a copy of your tax forms from the IRS, you should probably call them and they will definitely make you pay for it. If you used a tax preparation program, you should see if you can get it from them, since many tax prep programs include prior year forms as part of an upgrade package on this year’s tax prep program.

  • Jimhallberg

    Where can I deduct the cost of bookcases used to store my inventory of books which I’m selling on-line? Neither line 18 or 22 seem to be appropriate.

    • Kira Botkin

      I’d say 18, but if the total is quite a lot, you might want to put it as a separate line item under 27.

  • Rachel

    Where would you put online subscriptions and/or fees? For instance, we pay for an online accounting program to track our expenses… Legal/Professional services or office expense? Another example, fees paid to google or paypal when payments come in? Great post, BTW… thank you very much!!!

    • Kira Botkin

      I’ve personally put my Quickbooks costs under office expenses, but if you’re getting any help with the books through this program, it would probably fall under legal/professional services. And Google or Paypal fees can go under commissions and fees, line 10. Just make sure you keep good records of what costs went into each category if there’s more than one source of fees, etc, being lumped together.

      • Laurie

        Etsy transaction fees and paypal fees – could those be banking fees and go under other expenses?

  • Charlie

    Here’s a tricky question: if I refinance a rental property (2 family building, not my residence) using my own home as collateral (great rate), can I still deduct the interest on my Schedule C?

    • Kira Botkin

      That IS a trick question, because while you CAN deduct the interest as long as you’re legally liable for the loan (doesn’t matter how you got the loan), most landlords will need to use schedule E, not C.

      • hmmm…

        Hmm… that is trick question. It sounds like Charlie took a home equity loan on his primary residence to finance his rental property. Home equity loans are subject to AMT and 100k would be loan limit to be deductible. If the property are Bed and Breakfast type sch C “might” be the correct schedule and there might be other options for deducting the interest as business verse mortgage, etc… Your trick question require detail analysis to be accurately answer

  • Larry

    I pay to have my own needlework designs printed to sell. Where should the publication cost go? Also do I report the patterns I have left over I didn’t sell as inventory? If so how do I calculate their value…by what I paid to print each one ($.35) or wholesale value ($4)?

    • Kira Botkin

      Both the publication cost and the worth of the items you have left over go under cost of goods sold, which is part 3 of schedule C. You would use the 35 cent figure because that’s your cost – you can’t count your profit chickens before they hatch.

  • Will

    Where would my printing/copying expenses go? Is Internet expense considered an utility?

    • Kira Botkin

      It depends what the printing expenses are for – if they’re for fliers, brochures, etc, that would be advertising, but if it’s everyday printing in the office, it’s an office supply, I would put Internet expense as a utility, but make sure to keep all your bills.

  • crandall123

    Hey Kira, I own a small business and I am employed as well… Would i use the 1040 sc for both?

    • Kira Botkin

      You report your small business expenses on schedule C of the 1040, and your regular employment income on the 1040 directly. You don’t combine them.

  • Werfishin

    Hi Kira

    We have always kept our receipts, as a small business. I file it all away in a box marked for that year. anyway my friend says that there is a wrte off amount that we can have without a receipt, some George Bush thing? Any thoughts? Thanks allot

    • Kira Botkin

      I have no idea what your friend or George Bush was talking about, but you need to have documentation of all expenditures because if you get audited, they’ll probably throw out any expense you don’t have a record for. A receipt is best, but bank records or credit card statements are also good.

  • NyeAngel

    A friend bought some equipment, paid for training costs about $300 and paid for the filing fees about $155. We had assumed it would be deductible but we didn’t consider that she bought them with her debit cards. How can we make this deductible? Can I reimburse her with a business check? What can I do?

    • Kira Botkin

      I need some more specifics – did your friend buy some equipment FOR your business, or did she buy some equipment FROM your business? Is your friend a partner in this business? The method of payment doesn’t matter, although it does make accounting more interesting. When I buy something for my business and I use my own card, I mark it down in Quickbooks as an equity contribution. If your friend is a partner in the business and bought some stuff FOR the business, then it is still deductible as an expense.

      • NyeAngel

        No she bought it for me. My paycheck comes in on a set time and so it doesn’t always coincide when things need to be paid for. No she doesn’t want to officially partner, she just wants to help me out.

        • Kira Botkin

          Ah, I see. Here’s what I would do. Have her give you the receipt for each item (if she doesn’t have them, call the company that sold her the items and ask for a new one), and write her a separate check for each receipt. Then put a note with the receipt that says “cost paid to (friend’s name) with check #(whatever the check number is)”. That way you will be able to figure out what happened if you have to pull your files out again in a few years, and the figures will match the receipts.

  • NyeAngel

    What do I put it as? On the schedule C? Is it tax deductible that way?

    • Kira Botkin

      That’s why you have each expense as a separate check – file the check to your friend expense under wherever it would normally go if you’d paid for it.

      • NyeAngel

        ooooh. thank you so very much for you’re help!

  • Edds

    I am a US citizen living in Argentina for quite a long time now. Every year I file my taxes and I use form 2555 for foreign earn income, but I still have to pay the self employment tax, which comes from subtracting my income from my expenses. Now this year I will be travelling to NZ, for a five month contract. I will be an independent contractor as well. What can I deduct from that trip? the whole trip will be work related, since I will earn money there I want to make sure I deduct every possible expense so the self employment tax doesn’t increase that much… These expenses will also be recorded in the schedule c form? can you recommend any template I could use to keep my expenses organized for next year? thank you very much for your answer!

    • Kira Botkin

      I’m no expert on foreign earned income, but if you’ve deducted expenses in the past you should be able to continue doing it in a different country. You MUST use schedule C if you want to deduct anything, and you can deduct anything that’s normally allowed on schedule C. You should check the IRS site for guides, and there are several business expense organizer programs that you can find through Google, though I haven’t used any personally.

  • Skooteacher

    My husband is an Over the Road long-haul truck driver and our tax preparer had deductions on Schedule C line 18 $75 and line 22 $350 do these amounts seem high for his profession? It has made me question if they included deductions here that belonged else where.

    • Kira Botkin

      Depends if he bought anything that you’d classify as office supplies (line 18) or other supplies (line 22) which I would bet includes stuff he bought for the truck, log books, pens, binders, what have you. It doesn’t sound odd to me but your tax preparer should be able to show you exactly what receipts he classified under those lines. But in the end, you get the same deduction worth from an expense no matter what line it’s under, and those are pretty small amounts overall so it’s doubtful the IRS is going to flag them as really unusual.

  • Deb

    I am starting a new freelance contract job that will pay $3500. I am currently a freelance writer who doesn’t make over $750 in total. I also am a widow who receives approximately $18,000 a year in Social Security survivors benefits (non-taxable). That said, what I usaually pay my CPA is more than what I receive as a refund or have to pay out to the IRS. I will need to buy a new computer for the task — will I have the opportunity to deduct the purchase price or part of it since I pay so little in taxes already? thank you for providing such a valuable website as well.

    • Kira Botkin

      Well, the first thing I want to mention is that all self-employed income is potentially taxable, so when you say you normally make $750, even though it’s not much, it does still need to go on your schedule C if they give you a 1099 for it. Second, it doesn’t matter how much you pay in taxes, you always can deduct your expenses on a schedule C. Third, while computers technically are supposed to be depreciated, that rule was made when they cost a lot more than they do now…. but, in reality, I imagine most people just deduct the whole expense under line 22 and call it a day.

  • VM

    I have a quick question for you. I sell a product in US that I buy overseas. My question is that since I pay for the product with cash (foreign currency), what documentation do I need at the time of taxes to count that as cost of product and deduct from taxes. Also, since the receipt has the amount in foreign currency, how do I translate that to US dollars. Do I use that days exchange rate or some other way.

    Thanks a lot in advance.

    • Kira Botkin

      Any transaction in cash should generate a receipt – if the vendor doesn’t give you one, write one for yourself.

      Keeping a log of the exchange rates sounds like a good idea.

  • Eric Webb

    I pay non-US citizen contractors to perform work – I don’t have to issue a 1099 but does that then negate expensing the cost of paying them on my Tax form? What’s the best way to handle this?

    • Kira Botkin

      If they’re working in the US and have a TIN or something similar, you should be issuing them a 1099 even if they are not citizens. If they are not working in the US, you should probably consult a tax expert in their country to see if you need to send them something. You can still deduct the expense of paying them on your taxes.

  • Valerie

    Quick question: I just started a consulting business in the second half of 2012 and the majority of my income came from running a deal on LivingSocial. They took 60% and cut me a check for the remaining 40%. So, do I report the full value of each deal as my income and then deduct the 60% they took off the top as “Advertising Expense” or do I only report the 40% I actually got from them for my income and exclude this from the advertising expense category

    • Kira Botkin

      You should only report income you actually got, so only report the 40% you got and don’t put anything in advertising.

  • Dennis_terri_elliott

    I am a self employed and in the flooring business. Carpet layer… If I deduct supplies from my gross earnngs for the week does the flooring store get to deduct or do I since I was charged for the and it was deducted on my invoice???

    • Kira Botkin

      I’m not following.. if you paid for the supplies you can deduct them. If the flooring store is giving you supplies on credit (ie they give you the stuff now, and they take it out of the amount they owe you when you’re done) then no, you can’t deduct it.

  • Marty

    Hi Kira. I have 80,000 business miles for last year. Is it allowable for me to deduct only 50,000 of the miles if it leaves me in a better situation?
    When I include all 80,000 on my return, my taxable income is so low that I do not qualify for some tax credits, that I will qualify for if my taxable income is slightly higher

    • Kira Botkin

      There’s no law saying you must take all the deductions you’re entitled to, so this seems logical to me.

  • Daisy

    Hi Kira! I am studying to take the state licensure exam in my field. Are the study materials and cost of the exam something I can write off? I spent over $1000 so far preparing for this test. The test alone cost $200. Thanks!

    • Kira Botkin

      Are you working as an independent contractor or a freelancer in this field, or is this to get a job? If yes, then you can deduct it. If you’re trying to get a job with it, you could try to put it under jobseeking expenses, but the most logical place to put it is unreimbursed employee expenses on your schedule A.

  • Slinky

    I have the same question as daisy. Further, I’m an independent contractor in the field already. Can I deduct these on line 23 for initial licensure?

    • Kira Botkin

      Yes, if you’re already working as an independent contractor in your field, I’d go ahead and deduct your licensure costs as a cost of doing business.

      • Slinky

        I’ve had one one suggest that all initial license costs should be amortized over 15 years. Since I started the year working unlicensed and then applied for both provisional and full license, is it true that I would have to amortize these expenses as business start up costs?

        • Kira Botkin

          When you amortize something, you do so over the period of its useful life. I’ve never heard of a license that lasted fifteen years – almost everyone who gets licensed must be re-certified every few years. So if the license was extremely expensive, I could see amortizing it over the years until you had to re-up your license. But an intangible asset that doesn’t have a specific useful life doesn’t have to be amortized. And especially if the license was not very expensive (say under $2500) I’d just deduct the whole thing in one year and not amortize. When people talk about amortizing licenses they are usually talking about very expensive licenses like a broadcast license or one of those New York taxi medallions that cost a quarter million dollars.

  • elva

    I purchased a vehicle to use in my business in 2011 and started depreciation on it, but in 2012 I didn’t use it for business anymore. Can I still depreciate it as an expense on my sch c, I used another vehicle in 2012.

    • Kira Botkin

      If it’s no longer being used for the business, you can’t continue deducting its depreciation.

  • http://www.facebook.com/SonyaRoweBunch Sonya Rowe Bunch

    im trying to find a place on my sch. c to deduct exspence of having a shop built last year,for my small business. does anyone know where i record that info at?

    • Kira Botkin

      It sounds like you’re talking about a significant expense – you are probably going to need to depreciate that. You can’t deduct a huge expense all in one year for something you’ll keep using for several years. Depreciation is annoying – if you’ve never done it before, I’d enlist professional help.

  • CountryFarmBoy

    Hello Kira,

    Here’s a question for you. I’m a photographer that converted a barn into a studio for taking senior pictures in 2011. It’s 32′ x 48′, but I only use 28′ x 28′ for the studio. It’s dry-walled and heated and is sectioned off from the rest of the barn. In 2011 I was claiming the home office deduction for my house of only 64 square feet for the part of a room I used for my billing. Now that I have the studio I don’t use the home part as much and do most of my work out in the studio, how do I deduct that? The barn is only 46′ from my house. Is this still considered working out of my house? The studio and the house use the same electric and heat, so I deduct utilities as part of my home office. Thanks for any input!!

    • Kira Botkin

      You can deduct any place that you use exclusively for work as an “office” even if it isn’t one in the traditional sense. You would only be able to use the 28×28 portion, and should try your best to figure out what portion of the utilities belong to the barn and the house respectively and then divide it up from there. And as long as you are still using the room for billing and aren’t using it for anything else, even if not as much, you can still use that as part of your home office deduction calculations.

  • Mario

    HI Kira!
    Very useful article.. this is my first year as independent contractor… my question is regarding contractor work. The people I hire are usually day laborers, thus they dont get paid more than the 600 required for a 1099. However when added up all my years contractor wages reach the 20,000. I was wondering, since I dont have any 1099s to “prove” that I paid these people can I still take that deduction in my taxes or will I get In trouble with the IRS. I mean its obvious that Icant do all the work by myself….

    • Kira Botkin

      As long as you have good records of who showed up on what days and how much you paid them, it is OK to not have 1099s and you can still deduct the costs under contract labor. If you paid them with checks, you are golden! Just keep copies of the checks.

      However if by day laborers you mean guys you pick up in the parking lot of a Home Depot for one day’s work and pay cash, you are going to run into some issues, if you don’t have names, hours worked, amount paid, etc in some more tangible format.

  • DJC

    I am a CA school teacher, who moonlights as a personal assistant. My school district takes out STRS (State Teachers Retirement System) withholdings, and my second employer takes out Social Security withholdings. My ex-husband (of 20 years) made good money. I most likely won’t need either my STRS or my SS when I retire because I am entitled to 1/2 my ex’s SS, which is bound to be more than what I would otherwise be entitled to from STRS & my SS combined. Is there any way around this double-withholding?

  • KJ

    Good morning, Kira!
    Just wondering about tax deductions in relation to foreign travel if it were specifically for buying purposes (i.e. European vintage / antique items specifically purchased to resell here in the states). Would any of the travel expenses be tax deductible with proper receipts and documentation?

  • Elisabeth Johnson

    I have a tricky question. I am trying to get my taxes done this week, I filed for an extension because I was confused…. I”m still confused.

    I have run a homeschool program and managed all the money, paying tutors, facility and program costs, etc. The tricky part is I collect money from the parents at the beginning of the school year, and use it throughout the year to pay tutors, supplies, etc. If I claim the money I collected as income, my expenses will not balance my income and it will look like I made a ton of money, when in fact, I just haven’t spent it yet. How do I claim my income (which is not really mine, I just manage the money).

  • http://www.joetaxpayer.com JoeTaxpayer

    2013 is the year I’ll file schedule C. What I treated prior as “hobby income” and entered as ‘other’ now has some costs that I can write off. I understand that Schedule C income allows me to take advantage of a Solo 401(k) which I set up, but not yet funded.
    Say the Schedule C shows $2000 income and $1000 in expenses. Easy enough, $1000 flow to me as taxable income. Is the $1000 the limit for my 401(k) deposit, or is it the full $2000? Depending on the year, expenses might cluster at the end, and this would mean I shouldn’t make any deposits until I know my net if that’s all that can go to the 401(k).
    I know this seems a simple question, just not finding the answer in any IRS docs.

  • Lindsay

    My husband is an OTR driver. We enter actual business expenses for the vehicle. Do we need to add this as an asset for depreciation as well?

  • Bertha

    My husband died Oct. 2013. He had small business and filed his expenses on Schedule C. I don’t know where his records or receipts are and I am trying to file our taxes. Do I have to forego and lose the deductions? He did not pay estimated taxes so he owes taxes on his 1099s. What can I do?

  • Stanley Steamer

    I searched everywhere for this info. Thanks, Kira! Good job.

  • Keyed Management

    You *can* use the standard mileage rate for ‘for-hire’ vehicles. This should be updated in your article.

  • John

    Hi, I started a company of services and had made a special software for a product we want to sell. This software has taken a long time to develop and has become very expensive. Can the amount invested in this software be accounted as an expense or a deduction?

  • Steve Cosio

    I own a small ad agency. I make 15% commission on all sales that go through my business.

    If a client buys a $1000 radio commercial, they make the payment out to me. I pay the radio station $850 for the ad and $150 is my commission.

    Question: Do I report $1000 as income and $850 outflow or just report my $150 commission as income? If it’s the former, on what line do I report the outflow?

    Thank you in advance.

    • TexanLovesNY

      You could report the sales as $1000 and Cost of Goods sold as $850. That would net the income to $150. You would have to have your checking account show both the inflow and outflow, however, if audited.

      • Steve Cosio

        And… I only pay tax on the $150 net, yes?

        • ASK26


  • Tina

    I have been working as a freelancer and in 2014 added selling items from a local resale shop. I am now working on my taxes. Can you tell me, where and what category should the space rental would fall into?
    Thank you :-)

  • Kim

    I own a small business (LLC). My parents helped pay for start-up expenses (inventory, lease, utilities, advertising). Can I report these expenses on my tax return?

    • rmw100

      Yes. The IRS has specific rules for start up costs. As long as they are minor you should be able to deduct them in your first year.

      You need to read the rules.

  • tj66

    As I am disabled and have more time on my hands to do things on the computer, I am helping a self-employed family member complete his tax forms. My question is: If he bought a new laptop that is used about 80-90% just for business purposes (he is not someone who likes to be on the computer for personal reasons), where would that expense be claimed? Home office? Schedule C? What line?

    • rmw100

      Schedule C – Home office. He has to reduce the expense for the time he spends using it for personal reasons.

  • Kevin

    Hey there, I just started my consulting business in 2014. I received a 1099 from the company that I did consulting work for. When I go to enter my income into taxslayer I put it in under 7.Nonemployee compensation. Under the profit and loss section, do I add that amount in the other income section?

  • tan

    I business had no income last year. Can I still deduct expenses I incurred ?

    • Goaty McCheese

      No. But you can “carry over” these expenses to a future year when you do have income.

  • Andrea

    I recently started a business as a travel consultant. I book guides and drivers for clients who travel to Italy. How do I deduct the payments for services to foreign vendors (none of these vendors are US citizens)? Occasionally, I also book for travel agents and have collected commissions for them which I, in turn, pay back to them. Where would I deduct these commissions paid?

  • http://www.pajheil.blogspot.com/ NobodyN

    I’m glad this subject is still open for comments. I’m starting a small business to publish my original e-books and I saw the answer that I put the ISBNs under “other.” If I buy a bundle but don’t use them all in the tax year when I buy them, do I report them all the year I buy them or do I report them the year I use them, and is that considered a production cost?

  • gwhosubex

    ” IRS agents are easily impressed if you’ve got pages and pages of this stuff.”

    This is great news because I’ve always had an emotional emptiness due to absent and neglectful parents, that I know only the approval of an IRS auditor can fill.

  • gwhosubex

    God bless the IRS. if it weren’t for them, what would cause me to spend time and energy I could have spent building a better product, or enjoying time with my family, on something I otherwise would not have to do?

    Somebody has to dig those ditches, and fill them back up, right? Somebody has to create inefficient arbitrary rules that creates jobs for people who make sure those rules are followed, in order to pay the people who ensure they’re followed.