What Is a Schedule C? The Self-Employment Tax Form Explained

Schedule C is the IRS tax form you use to report income and expenses from a business you run yourself — freelancing, consulting, driving for Uber, selling on Etsy, or running any unincorporated business. If you’re self-employed in any way, Schedule C is probably the form that turns your side income into a tax return.

Quick answer: what is a Schedule C?

Schedule C is “Profit or Loss From Business (Sole Proprietorship)” — an attachment to your personal tax return (Form 1040). It reports your gross self-employment income, subtracts your business expenses, and calculates your net profit (or loss). That net profit flows to Form 1040 as ordinary income and is also used to calculate self-employment tax on Schedule SE.

If you ever made money as a freelancer, contractor, or solo business owner — even a few hundred dollars — Schedule C is how the IRS expects you to report it.

Who files a Schedule C?

You file a Schedule C if you operate as a sole proprietor or single-member LLC and you had business activity during the year. Common examples:

Freelance writers, designers, photographers, consultants
Rideshare drivers, food delivery drivers
Etsy sellers, eBay flippers, online resellers
Personal trainers, tutors, music teachers, lawn care
House cleaners, handyworkers, pet sitters
Independent contractors paid via 1099-NEC
Anyone running an unincorporated side business
Single-member LLCs that haven’t elected to be taxed as a corporation

If your business is a partnership, an S corp, a C corp, or a multi-member LLC, you use different forms (Schedule E, Form 1065, Form 1120, etc.). But for solo operations, Schedule C is the default.

See What Is a 1099? for related context on contractor income.

What goes on a Schedule C

The form is one page (front and back). It walks through your business in five main parts:

Part I — Income

This section captures your gross income from the business:

Gross receipts or sales
Returns and allowances (subtracted)
Cost of goods sold (for product-based businesses) — calculated separately in Part III
Other income (interest, rebates, fuel tax credits)

Your gross income includes all business income — whether or not you received a 1099 for it. The IRS expects you to report every dollar.

Part II — Expenses

This is the most detailed section. You list business expenses by category:

Advertising
Car and truck expenses
Commissions and fees
Contract labor
Depreciation and section 179 (large equipment write-offs)
Insurance (other than health)
Interest (mortgage and other)
Legal and professional services
Office expense
Rent or lease (vehicles, equipment, business property)
Repairs and maintenance
Supplies
Taxes and licenses
Travel and meals
Utilities
Wages
Other expenses (custom categories)

Net profit (or loss) is gross income minus total expenses. That number flows to Form 1040, where it’s added to your other income and taxed as ordinary income.

Part III — Cost of Goods Sold

Only relevant for businesses that sell physical products. Tracks inventory bought, sold, and remaining.

Part IV — Vehicle information

If you claim car expenses, you provide info about your vehicle and total miles driven for business, commuting, and personal use.

Part V — Other expenses

Detail of any expenses listed as “other” in Part II — categories that don’t fit the standard ones.

Schedule C and self-employment tax

This is the part that surprises most first-time filers. Net profit from Schedule C doesn’t just get income tax. It also gets self-employment tax — 15.3% on the first $184,500 of net earnings (2026), which covers Social Security and Medicare.

When you’re a W-2 employee, you pay 7.65% in FICA and your employer pays the other 7.65%. When you’re self-employed, you pay both halves — the full 15.3%. The math:

Net Schedule C Profit	Income Tax (22% bracket example)	SE Tax	Total Tax
$5,000	~$1,100	~$707	~$1,807
$10,000	~$2,200	~$1,413	~$3,613
$25,000	~$5,500	~$3,532	~$9,032

So a freelancer in the 22% bracket who clears $10,000 from a side hustle owes roughly $3,600 in federal tax — about 36% of profit. State tax would be on top of that.

Half of self-employment tax is deductible on Schedule 1 of your 1040, which softens the blow slightly — but it’s still a real burden compared to W-2 income.

See Self-Employment Tax Explained for the full mechanics.

Common Schedule C deductions to know about

Tracking expenses well is the difference between paying tax on $20,000 of gross income vs. $10,000 of net income. Some commonly missed deductions:

Home office

If you have a dedicated space in your home used regularly and exclusively for business, you can deduct a portion of rent/mortgage, utilities, insurance, and depreciation — either using the simplified method ($5 per sq ft, max $1,500) or the actual expense method (more paperwork, often larger deduction).

Vehicle expenses

Two ways: standard mileage rate (about 67 cents per business mile in 2026) or actual costs (gas, maintenance, insurance, depreciation — multiplied by business-use percentage). Choose the method that gives the bigger deduction for your situation; you can switch in later years with some restrictions.

Health insurance premiums

If you’re self-employed and not eligible for an employer plan (yours or a spouse’s), you can deduct health insurance premiums for yourself, your spouse, and dependents — on Schedule 1, not Schedule C, but tied directly to your self-employment income.

Retirement contributions

Self-employed people can open SEP IRAs, Solo 401(k)s, or SIMPLE IRAs and deduct large contributions. A Solo 401(k) lets you contribute up to about 25% of net self-employment earnings plus the employee deferral — potentially $70,000+ total in some years.

Internet, phone, software, subscriptions

The business-use percentage of these is deductible. If your phone is 60% business / 40% personal, you can deduct 60% of the bill.

Schedule C and quarterly estimated taxes

Because no employer is withholding taxes from your self-employment income, the IRS expects you to pay as you go. That means quarterly estimated tax payments — due in April, June, September, and January — covering federal income tax and self-employment tax.

If you don’t pay enough during the year, you can owe an underpayment penalty on top of the tax. The safe harbor: pay at least 90% of this year’s tax or 100% of last year’s (110% if your AGI was over $150,000) — whichever is lower — and you’re fine.

See Quarterly Estimated Taxes.

Recordkeeping for Schedule C

Good records make Schedule C easy. Bad records make it stressful and expensive. The basics:

Separate business bank account. Even if you’re a sole proprietor, keeping business income and expenses in their own account simplifies everything.
Track every expense. Apps like QuickBooks Self-Employed, Wave, or even a spreadsheet work. Categorize as you go.
Keep receipts. Photos in a folder are fine. The IRS asks for documentation if it audits you.
Log business miles. Apps like MileIQ track automatically using GPS. A simple notebook works too.
Keep records for at least 3 years — 6 if you under-reported income by more than 25%.

Schedule C vs. Schedule C-EZ

Schedule C-EZ (a shorter version of Schedule C) was retired in 2019. There’s only one form now: Schedule C. Most tax software handles it automatically once you enter your business income and expenses.

When you don’t need to file a Schedule C

If your net self-employment earnings are less than $400, you don’t owe self-employment tax. You may still need to report the income for income tax purposes, but you don’t need to file Schedule SE.

Hobby income (where you’re not really trying to make a profit) is reported differently — on Schedule 1 as “other income.” You can’t deduct hobby expenses under current law. The IRS has tests for whether an activity is a hobby or a business; if you have profit motive, treat consistent records, and try to grow it, it’s a business.

If you’re new to self-employment

First-time Schedule C filers often miss things. The biggest pitfalls:

Forgetting that self-employment tax doubles your total tax burden compared to expectations based only on income tax brackets
Not making quarterly estimated payments — then owing a year of taxes (plus penalty) all at once
Mixing business and personal expenses, making it impossible to capture all deductions
Missing the home office, vehicle, and health insurance deductions
Not setting aside enough — a good rule of thumb is to save 25–35% of every dollar of net self-employment income for taxes

Tax software (TurboTax, H&R Block, FreeTaxUSA) walks you through Schedule C and tells you what you can claim. For larger or more complex businesses, a CPA familiar with small business can pay for themselves in deductions you didn’t know you could take.

What Is a Schedule C?

Quick answer: what is a Schedule C?

Who files a Schedule C?