Self-employment ยท Schedule C
Schedule C Deduction Categories: The Checklist on the Form Itself
Schedule C (Form 1040), Profit or Loss From Business, is the form a sole proprietor reports business income and expenses on. Part II of the form is a printed list of expense categories, and it doubles as the checklist for the whole subject: every category below is named exactly as the 2026 form names it, in the form's own order. This page says in general terms what each category covers and what records support it. It does not decide whether any particular cost of yours belongs in a category. That depends on your facts, and the general test the IRS applies is that a business expense be an ordinary and necessary cost of carrying on the trade or business, and a cost of the business rather than of the proprietor personally.
Last reviewed: November 4, 2026.
How to read this checklist
Read every line below as a statement of what the category generally covers: the IRS generally treats each category as covering the following. A category existing on the form is a published fact. Whether a specific payment of yours is an ordinary and necessary business expense, in the amount and the year you have in mind, is a determination this page does not make and no checklist can. Expenses set the profit, and profit is the starting figure for both the income tax and the self-employment tax, so the categories below matter twice over. The 1099 tax calculator shows what a given profit figure produces in tax.
the categories are the form's own words
The categories, as Part II of the 2026 form prints them
| Category, in the form's words | In general terms |
|---|---|
| Advertising | The cost of advertising the business: listings, ads, signs, and promotional material bought to bring in customers. |
| Car and truck expenses | The business cost of a vehicle used in the work, figured either from the standard mileage rate the IRS publishes for the year or from actual vehicle costs. The form asks for vehicle information and whether written evidence supports the figures; a mileage record kept as you go is that evidence. |
| Commissions and fees | Commissions and fees paid to others in the course of the business, other than amounts that belong in the cost of goods sold. |
| Contract labor | Amounts paid to independent contractors and other non-employees for work in the business. This is the category where payments for other people's labour sit, and information returns (Form 1099-NEC) attach to it under the reporting rules. |
| Depletion | The depletion allowance for natural resources and similar assets, a category most service businesses never touch. |
| Depreciation and section 179 expense deduction | The cost of longer-lived business property, recovered over its useful life or, where the section 179 election applies, in the year it is placed in service. This category is figured on Form 4562 rather than on the face of Schedule C. |
| Employee benefit programs | Contributions to employee benefit programs for your employees, such as insurance and similar plans, other than pension and profit-sharing plans. |
| Insurance (other than health) | Premiums for business insurance, such as liability and property cover for the business. The form's own label excludes health insurance, which is handled elsewhere. |
| Interest | Interest on money borrowed for the business, shown on the form in three parts: mortgage interest paid to banks and similar lenders, vehicle loan interest, and other interest. |
| Legal and professional services | Fees for legal, accounting, and other professional services the business uses. |
| Office expense | The running costs of an office: supplies consumed in the office, postage, and similar day to day items, as distinct from the supplies category below. |
| Pension and profit-sharing plans | Contributions to pension and profit-sharing plans for employees. A retirement plan for the proprietor personally is not entered here; it is handled on the proprietor's own return. |
| Rent or lease | Rent for business property, shown on the form in two parts: vehicles, machinery, and equipment, and other business property such as premises. |
| Repairs and maintenance | Work that keeps business property in operating condition. Work that substantially improves property belongs with depreciation instead, a line the instructions draw in detail. |
| Supplies | Materials and supplies the business consumes in producing its goods or services, other than amounts counted in the cost of goods sold. |
| Taxes and licenses | Business taxes and licence fees: business licences, regulatory fees, and taxes assessed on the business rather than on the proprietor personally. |
| Travel | Travel away from home for the business: transport and lodging on business trips, kept separate on the form from meals. |
| Deductible meals | Business meals, on their own line of the form and subject to their own limits in the instructions. Entertainment is not a business expense category; the form provides no line for it. |
| Utilities | Utilities for business premises: power, water, phone, and connectivity used by the business. |
| Wages (less employment credits) | Wages paid to employees of the business. A sole proprietor cannot pay themselves wages, so the proprietor's own draw never appears here. |
| Energy efficient commercial buildings deduction | A specialised deduction for energy efficient commercial building property, carried on the form with its own attachment (Form 7205). Most sole proprietors never meet it. |
| Other expenses | The form's catch-all, listed item by item on the form's second page: any ordinary and necessary business cost that fits no named category above is written out here by name. |
Businesses that sell products have a second computation before these categories: Part III of the form figures the cost of goods sold from inventory, purchases, materials, and the other costs of what was sold, and that figure comes off receipts before the expense categories begin. The form also carries the proprietor's accounting method and material participation questions on its first page, which decide how some of these figures are treated.
Business use of the home: two methods, in words
Expenses for business use of the home have their own place on the form, kept apart from the categories above, and the IRS offers two ways to figure them (Topic No. 509). Either way, the starting requirement is the same: the part of the home must be used regularly and exclusively for the business, as the principal place of business, or as a place to meet clients or customers in the normal course of business, with stated exceptions for storage and daycare.
The simplified option. A prescribed rate of $5 per square foot of the portion of the home used for business, up to a maximum of 300 square feet, so the most this method can produce in a year is $1,500. No separate form is filed; the square footage figures are entered on Schedule C itself. Depreciation is treated as zero, and there is no carryover of an amount the year's income limit disallows, but the choice can be made fresh each year (Revenue Procedure 2013-13).
The regular method. The actual expenses of running the home, divided between personal and business use by the business percentage of the home, and figured on Form 8829. It reaches more of the real cost, including depreciation of the business part of the home, at the price of keeping the underlying bills and the depreciation record. Under this method, an amount the gross income limit disallows can in general be carried forward; under the simplified option it cannot.
Either method is limited by the income from the business use of the home: the home office figure cannot exceed the gross income from that use, reduced by the business expenses not connected with the home (Topic No. 509).
records first, figures second
The records that support the checklist
Every figure on the form rests on records, and Publication 583, Starting a Business and Keeping Records, is the IRS's own guide to keeping them. The working standard it sets is that records must show the amount, the date, the parties, and the business purpose, for income as much as for expenses:
- For income: invoices issued, bank deposit records, and the information returns (Forms 1099-NEC and 1099-K) that report payments to the business.
- For expenses: receipts, invoices from suppliers, bank and card statements showing the payment, and contracts for anything recurring.
- For vehicle costs: a mileage record made as you go, showing dates, miles, and where the driving was business driving. The form itself asks whether written evidence supports the vehicle figures.
- For the home: measurements of the space used for business and, under the regular method, the bills the percentage is applied to.
- Kept by category, as the year runs, rather than reconstructed at filing time. Publication 583 also sets the periods for how long each kind of record is kept, which run from the limitation periods on the returns they support.
What this checklist is not
- No amounts are stated for any category, because the form states none. There is no standard sum for advertising or supplies; there is only the cost the business actually bore, supported by records.
- Personal costs are not business expenses, however businesslike they feel. Commuting between home and a regular work location is the standing example: it is personal travel, and no category on the form converts it.
- A category on the form is not a promise about any one payment. The ordinary and necessary test, the personal expense bar, and the record requirement all still apply to each figure.
Questions and answers
My software subscription does not match any named category. Where does it go on the form?
The form anticipates that case. Part II ends with 'Other expenses', a line fed by a list on the form's second page where expenses that fit no named category are written out by name. A cost does not lose its character by being listed there; it is still tested the same way as every other category, as an ordinary and necessary cost of the business, supported by the same records.
Can I deduct what I pay myself from the business?
No. A sole proprietor's own pay is not wages on Schedule C and is not an expense of the business; the profit itself is the proprietor's income, taxed whether it is drawn out or left in the business account (IRS Publication 334). Wages on the form are wages paid to employees.
Do I need a receipt for every expense on this list?
You need records that support every amount: what was bought, when, from whom, and what it cost, with a business reason where that is not obvious. The records are usually a combination of receipts, invoices, bank and card statements, and logs for things like mileage and home use. IRS Publication 583, Starting a Business and Keeping Records, sets out what to keep and how long to keep it, including the limitation periods that decide when records can be let go.
Sources
- Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship), tax year 2026. The category names and their order are Part II of the form itself, read at irs.gov November 4, 2026, including the business use of home entry and its simplified method worksheet reference.
- IRS, Topic No. 509, Business Use of Home. The regular and exclusive use requirements, the regular method figured on Form 8829, the gross income limitation, and the simplified option at $5 per square foot up to 300 square feet under Revenue Procedure 2013-13. Read in full November 4, 2026.
- IRS, Publication 583, Starting a Business and Keeping Records. The recordkeeping standard for supporting business income and expenses, and the periods for keeping records. Checked November 4, 2026.
- IRS, Publication 334, Tax Guide for Small Business, and Publication 535, Business Expenses. The ordinary and necessary test for business expenses, and the rule that a sole proprietor's own pay is not a business wage. Checked November 4, 2026.
Last reviewed: November 4, 2026.