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28 Deduction Categories, Each Mapped to a Current IRS Source

Use this as the source map behind the Bookkeeping Tracker's self-employed deduction categories.

Tax year 2026

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Full 2026 deduction reference

Each card shows where the category belongs, the IRS source behind it, and the full rule text from the verified dataset.

26 categories are Schedule C entries; 2 use a separate Form 1040 route.

01

Advertising and Marketing

Schedule C

Line 8: Advertising

Key rule

  • Advertising costs are deductible if they are ordinary and necessary for your business.
  • They must be directly related to your business activities.

IRS source

Sch C (Form 1040) Instructions; IRS.gov Guide to Business Expense Resources; IRC §162

Source checked · Jul 2026

02

Bank and Merchant Fees

Schedule C

Line 27b: Other Expenses

Key rule

  • Bank charges and merchant processing fees are deductible when they are for business accounts and business transactions.
  • Schedule C has no line of its own for them.
  • List them in Part V (Other Expenses), and the Part V total (Line 48) goes on Line 27b.
  • Sales commissions and affiliate or referral payouts go on a different line.
  • See category 26.

IRS source

Sch C (Form 1040) Instructions: Part V Other Expenses; IRS.gov Guide to Business Expense Resources; IRC §162

Source checked · Sep 2026

03

Business Meals

Schedule C

Line 24b: Deductible Meals

Key rule

  • Business meals are 50% deductible (80% for certain workers subject to Department of Transportation hours-of-service limits).
  • The current rule is the final regulation, Treas. Reg. §1.274-12.
  • IRS Notice 2018-76 was temporary guidance that came before it.
  • A meal qualifies when all four of these are true:
    1. it is an ordinary and necessary business expense under §162(a)
    2. it is not lavish or extravagant for the situation
    3. you or your employee is present
    4. the food or drinks are provided to you or a business associate.
  • A business associate is anyone you could reasonably expect to engage or deal with in the active conduct of your business: a customer, client, supplier, employee, agent, partner, or professional adviser, established or prospective.

Watch out: You do not have to discuss business during the meal.

  • "Business must be discussed before, during, or after" is the old entertainment-era test from before 2018.
  • It is not the current standard.

Watch out: A solo meal while traveling for business can count.

  • Because the food or drinks can be provided to you alone, a meal you eat by yourself while traveling for business is still 50% deductible.
  • No client or associate has to be at the table.

Watch out: Entertainment is not deductible.

  • Entertainment costs must be listed separately from the meal cost, not combined with it.

IRS source

Sch C (Form 1040) Instructions; Pub 463; IRC §274; Treas. Reg. §1.274-12

Source checked · Sep 2026

04

Business Travel

Schedule C

Line 24a: Travel

Key rule

  • Travel costs are deductible when you travel away from your tax home overnight for business and the costs are ordinary and necessary.
  • Travel that mixes business and personal purposes requires an allocation between the two.
  • Meals do not go on Line 24a.
  • They go on Line 24b (see category 3).

Watch out: Commuting has an exception that often applies to people who work from home.

  • Trips between your home and a regular work location are generally commuting, and commuting is not deductible.
  • But if your home office is your principal place of business under §280A(c)(1)(A) (see categories 9 and 10), your home counts as a business location.
  • Trips between your home and any other work location in the same business are then deductible transportation, not commuting.
  • This is true whatever the distance, and whether the other location is regular or temporary (Rev. Rul. 99-7, citing Curphey v. Commissioner, 73 T.C. 766 (1980)).

IRS source

Sch C (Form 1040) Instructions; Pub 463; Rev. Rul. 99-7

Source checked · Sep 2026

05

Contract Labor / 1099

Schedule C

Line 11 (Contract Labor)

Key rule

  • Payments to independent contractors for their services are deductible.

Watch out: The Form 1099-NEC threshold is now $2,000.

  • For tax years beginning after 2025, payers must file Form 1099-NEC for payments of $2,000 or more to a contractor that is not a corporation.
  • It was $600 before.
  • The $600 figure applies only to tax years 2025 and earlier (Instructions for Forms 1099-MISC and 1099-NEC, December 2026 revision).

IRS source

Sch C Instructions; Instructions for Forms 1099-MISC and 1099-NEC

Source checked · Sep 2026

06

Education and Training

Schedule C

Line 27b: Other Expenses

Key rule

  • Education costs are deductible if the education maintains or improves skills your current trade or business requires.
  • Schedule C has no line of its own for them.
  • List them in Part V (Other Expenses), and the Part V total (Line 48) goes on Line 27b.

Watch out: Education is not deductible if either of two tests applies.

  • First, education that meets the minimum educational requirements for your current trade or business is not deductible (Treas. Reg. §1.162-5(b)(2)).
  • This test can apply even after you already hold the position.
  • Second, education that qualifies you for a new trade or business is not deductible (Treas. Reg. §1.162-5(b)(3)).
  • This test applies even if you never plan to enter that new trade or business.
  • A change of duties counts as a new trade or business unless the new duties are the same general type of work as your present work.

IRS source

Sch C (Form 1040) Instructions: Part V Other Expenses; IRS.gov Guide to Business Expense Resources; IRC §162; Treas. Reg. §1.162-5

Source checked · Sep 2026

07

Equipment and Tools (<$2,500)

Schedule C

Line 27b: Other Expenses

Key rule

  • Under the de minimis safe harbor, tangible property that costs $2,500 or less per item or invoice ($5,000 if you have an applicable financial statement) can be deducted in the year you buy it instead of being depreciated.
  • Per the Schedule C Instructions, these amounts can only be deducted as other expenses.
  • List them in Part V, and the Part V total (Line 48) goes on Line 27b.
  • They cannot be entered on any other line.

Watch out: This is an election, not automatic, and it has a timing trap.

  • You need an accounting procedure in place at the start of the tax year that treats these amounts as an expense (Treas. Reg. §1.263(a)-1(f)(1)(ii)).
  • If you have an applicable financial statement, that procedure must be in writing.
  • If you do not have one, it does not have to be written, but you must expense these amounts in your books and records under a consistent accounting procedure or policy that existed at the start of the year.
  • A policy adopted in December does not cover a purchase made in April.
  • The procedures must come before the purchase, not just before filing.
  • The amounts must also be treated as an expense in your books and records (or your applicable financial statement) that year.
  • Then attach a statement titled "Section 1.263(a)-1(f) de minimis safe harbor election" to your original return, filed on time (including extensions).
  • The election cannot be made on an amended return.
  • It applies to all such amounts for that year or none of them, so you cannot choose which purchases it covers.
  • Once made, it cannot be revoked.
  • It does not carry over: each year you use it, you need a new election and procedures already in place.

Watch out: $2,500 is the limit of this safe harbor, not a limit on what you can deduct.

  • An item that costs exactly $2,500 is covered.
  • Property that costs more than $2,500 is simply outside this safe harbor.
  • Per the IRS, amounts above the limit are not subject to the safe harbor election, so they follow the normal rules for materials and supplies, repairs, and capitalization.
  • Property that must be capitalized is recovered on Line 13 through depreciation or a section 179 election.
  • See category 25.

IRS source

Sch C (Form 1040) Instructions: Part V Other Expenses; IRS Notice 2015-82; Treas. Reg. §1.263(a)-1(f)

Source checked · Sep 2026

08

Health Insurance Premiums

Not on Schedule C

Form 7206: Self-Employed Health Insurance Deduction

Key rule

  • Self-employed people can deduct health insurance premiums on Form 1040, Schedule 1, figured on Form 7206 (since 2023).
  • This deduction does not go on Schedule C.
  • It cannot be more than your net self-employment income.

Watch out: It is not only your own employer's plan that counts.

  • Per the Form 7206 Instructions, you cannot take the deduction for any month you were eligible to participate in any employer-subsidized health plan.
  • That includes a plan through your spouse's employer, or through the employer of a dependent or of your child under age 27.
  • It applies even if you never enrolled.
  • The test is done month by month, not once for the year.

Watch out: Marketplace coverage follows its own rules.

  • If your plan came through the Health Insurance Marketplace and advance premium tax credit payments were made, or you are claiming the premium tax credit, see Pub 974.
  • The deduction and the credit are figured together, not separately.
  • This page does not do that calculation.

IRS source

Form 7206 and its Instructions; Form 1040 Schedule 1 Instructions; Pub 974

Source checked · Sep 2026

09

Home Office: Simplified

Schedule C

Line 30: Business Use of Home

Key rule

  • The simplified method allows $5 per square foot for the part of your home used regularly and exclusively for business.
  • The most you can count is 300 square feet, so the most you can deduct is $1,500 a year.
  • You must meet the regular and exclusive use test.
  • Figure it on the Simplified Method Worksheet and enter the result directly on Line 30.
  • Form 8829 is not used with this method.

Watch out: The deduction is also capped by your business income.

  • It cannot be more than the gross income from the qualified business use of your home, minus business deductions not related to that use.
  • In a low-income or loss year, this cap can matter more than the $1,500 limit.

Watch out: Any amount the cap blocks is lost, not carried forward.

  • Under the simplified method, an amount disallowed by the income cap cannot be carried over to a later year.
  • The actual-expense method (category 10) works differently.

IRS source

Sch C (Form 1040) Instructions; Pub 587; Rev. Proc. 2013-13

Source checked · Sep 2026

10

Home Office: Actual

Schedule C

Line 30: Business Use of Home

Key rule

  • Your business percentage is your office's square feet divided by your home's total square feet.
  • That percentage is applied to your actual home expenses.
  • Direct expenses are 100% deductible.
  • Indirect expenses are deductible by the business percentage.
  • The deduction cannot be more than the gross income from the business use of your home.
  • Homeowners must account for depreciation.
  • Figure the deduction on Form 8829 and enter the result on Line 30.

IRS source

Sch C (Form 1040) Instructions; Pub 587

Source checked · Jul 2026

11

Business Insurance

Schedule C

Line 15: Insurance (Other Than Health)

Key rule

  • Insurance premiums are deductible if the insurance is ordinary and necessary to protect your business.
  • This includes liability, property, malpractice, and business continuation insurance.
  • Self-employed health insurance premiums do not go on this line.
  • See category 8.

IRS source

Sch C (Form 1040) Instructions; Pub 334 (Tax Guide for Small Business), Ch. 8: Insurance; IRS.gov Guide to Business Expense Resources; IRC §162

Source checked · Jul 2026

12

Interest on Business Loans

Schedule C

Line 16b: Interest (Other)

Key rule

  • Business interest is deductible when the loan money is used for business.
  • If a loan is used for both business and personal purposes, the interest must be split between them.
  • Line 16a is only for mortgage interest on business real property paid to banks or other financial institutions, reported on Form 1098.
  • Other business loan interest goes on Line 16b.
  • That includes loans not secured by real property, and mortgage interest with no Form 1098.

IRS source

Sch C (Form 1040) Instructions; IRC §163; IRS.gov Guide to Business Expense Resources

Source checked · Jul 2026

14

Licenses and Permits

Schedule C

Line 23: Taxes and Licenses

Key rule

  • Line 23 covers two things, even though this category is named for licenses and permits:
    1. state and local business taxes, such as sales tax you owe as the seller, real and personal property tax on business assets, and certain payroll-related taxes
    2. license and regulatory fees you must pay to practice your profession or run your business.
  • Both go on the same line.
  • Fines and penalties are not deductible (IRC §162(f)).
  • Federal income tax and self-employment tax are not deductible on this line.

IRS source

Sch C (Form 1040) Instructions; IRS.gov Guide to Business Expense Resources; IRC §162(f)

Source checked · Sep 2026

15

Office Supplies

Schedule C

Line 18: Office Expense

Key rule

  • Office supplies and postage you use running the business go on Line 18.
  • That covers paper, printer ink, pens, folders, stamps and shipping labels.
  • The Schedule C Instructions say to "Include on this line your expenses for office supplies and postage."
  • Materials you use up doing the work itself belong in category 28 (Line 22), not here.
  • Items expected to last well beyond the year, such as furniture or equipment, are not office expense.
  • See categories 7 and 25.

IRS source

Sch C (Form 1040) Instructions: Line 18; IRS.gov Guide to Business Expense Resources

Source checked · Sep 2026

16

Phone: Business Portion

Schedule C

Line 25: Utilities

Key rule

  • A phone (mobile or landline) used only for business is deductible on Line 25.
  • For a phone used for both business and personal calls, the business-use percentage is deductible.
  • Only the business use of a utility is deductible.

Watch out: The first landline into your home has its own rule.

  • Its base rate, including taxes, is not deductible, even if you use it for business.
  • Business long-distance and toll charges on that first line are deductible.
  • For any additional line, the business percentage of its full charges is deductible, including its base rate.

Watch out: The IRS names telephone here, not internet.

  • Neither the Schedule C Instructions for Line 25 nor Pub 587 addresses internet service.
  • Internet used for business falls under the general rules for business expenses: the cost must be ordinary and necessary (IRC §162), and personal use is never deductible (IRC §262), so a connection used for both business and personal purposes requires a reasonable allocation.
  • No IRS source assigns internet to a specific Schedule C line.
  • Because the right allocation, and the right line, depend on how you actually use the connection, this is one to take to your CPA rather than copy from someone else's return.

IRS source

Sch C (Form 1040) Instructions; IRS.gov Guide to Business Expense Resources; IRC §162; IRC §262

Source checked · Jul 2026

17

Rent and Workspace

Schedule C

Line 20b: Rent or Lease

Key rule

  • Rent paid for property used in your business is deductible.
  • Rent paid to a related party must be at arm's length.
  • Rent for your home does not go here.
  • Use the home office rules instead (categories 9 and 10).

IRS source

Sch C Instructions; IRC §162

Source checked · May 2026

18

Repairs and Maintenance

Schedule C

Line 21: Repairs and Maintenance

Key rule

  • The cost of incidental repairs and maintenance is deductible if the work does not add to the property's value or appreciably prolong its life.
  • You cannot deduct the value of your own labor.
  • Money spent to restore or replace property must be capitalized, not deducted here.

IRS source

Sch C (Form 1040) Instructions; IRS.gov Guide to Business Expense Resources; Treas. Reg. §1.162-4

Source checked · Jul 2026

19

Retirement Contributions

Not on Schedule C

Pub 560: SEP, SIMPLE, Qualified Plans

Key rule

  • Contributions to your own SEP IRA are deducted on Form 1040, not on Schedule C.
  • The deadline is your tax filing deadline, including extensions.
  • The 2026 cap is $72,000 (IRS cost-of-living notice; up from $70,000 in 2025).
  • It is reached only at high net earnings, so treat it as a ceiling, not a target.

Watch out: Your limit is not 25% of your net earnings.

  • For a self-employed person, applying the plan's 25% rate to net earnings overstates the limit.
  • Pub 560 explains why: your contribution and your net earnings depend on each other, so the deduction is figured indirectly by reducing the plan's rate.
  • The base is net profit, minus half of your self-employment tax, minus the SEP contribution itself.
  • For a 25% plan rate, the Rate Table for Self-Employed in Pub 560, chapter 5, gives 20%.
  • To figure your own amount, use the Rate Table or Rate Worksheet for Self-Employed in Pub 560.

Watch out: Putting in too much is hard to undo.

  • Per the IRS SEP Fix-It Guide, the excess (adjusted for earnings) must be distributed and returned to the employer, or kept only under a closing agreement with a sanction of at least 10% of the excess.
  • No deduction is allowed for the excess.

IRS source

Pub 560; Form 1040 Schedule 1 Instructions

Source checked · May 2026

20

Software and Subscriptions

Schedule C

Line 27b: Other Expenses

Key rule

  • Software and subscriptions used in your business are deductible in the year you pay for them (cash basis).
  • This follows the Schedule C Instructions' guidance on "technology and software tools" in Part V.
  • It covers online software (SaaS), apps, and digital services with a clear business purpose.
  • Schedule C has no line of its own for them.
  • List them in Part V (Other Expenses), and the Part V total (Line 48) goes on Line 27b.

Watch out: Some software does not belong here.

  • Software that must be capitalized and depreciated, or expensed under section 179, is excluded.
  • That includes most standalone computer software purchases.
  • See Pub 946.

IRS source

Sch C (Form 1040) Instructions: Part V Other Expenses (technology and software tools); IRS.gov Guide to Business Expense Resources; IRC §162

Source checked · Jul 2026

21

Vehicle: Standard Rate

Schedule C

Line 9: Car and Truck Expenses (standard mileage rate)

Key rule

  • Standard mileage goes on Line 9.
  • You must keep a mileage log made at or near the time of each trip.
  • Add parking fees and tolls to your mileage amount.
  • They are deductible on top of the per-mile rate, not included in it (Schedule C Instructions, Line 9: "Add to this amount your parking fees and tolls").
  • You cannot use the standard mileage rate if you used MACRS depreciation on the vehicle before.
  • Complete Part IV of Schedule C unless you must file Form 4562.

Watch out: The 2026 rate changed in the middle of the year.

  • It is $0.725 per business mile for miles driven January 1 through June 30, 2026 (IRS Notice 2026-10).
  • It is $0.76 per business mile for miles driven July 1 through December 31, 2026 (IRS standard mileage rates page; Announcement 2026-11, Internal Revenue Bulletin 2026-29).
  • Using the January rate for the whole year understates the deduction for every mile driven after June 30.
  • Each trip needs a date so the right rate can be applied.

Watch out: Commuting has a home-office exception.

  • Trips between your home and a regular work location are generally commuting and not deductible.
  • But if your home office is your principal place of business (§280A(c)(1)(A)), trips to other work locations in the same business are deductible mileage, not commuting.
  • See category 4 for the full rule (Rev. Rul. 99-7).

IRS source

Sch C (Form 1040) Instructions; Pub 463; IRS Notice 2026-10 (H1 rate); IRS standard-mileage-rates page / Announcement 2026-11 (H2 rate)

Source checked · Sep 2026

22

Vehicle: Actual Expenses

Schedule C

Line 9: Car and Truck Expenses (actual expense method)

Key rule

  • Actual expenses include gas, oil, repairs, insurance, registration, and depreciation (MACRS).
  • Your business-use percentage is applied to all of these costs.
  • Enter the total on Line 9, but show depreciation on Line 13 and lease payments on Line 20a.
  • Section 179 expensing and bonus depreciation may apply to business vehicles.

Watch out: This method is hard to leave.

  • It is more complex, and you generally cannot switch from actual expenses to the standard mileage rate in later years.

IRS source

Sch C (Form 1040) Instructions; Pub 463

Source checked · Jul 2026

23

Utilities: Business Portion

Schedule C

Line 25: Utilities

Key rule

  • Utilities for a separate business location are deducted in full on Line 25.
  • If you use the simplified home office method, utilities are already included in the $5 per square foot rate.
  • Do not deduct them again on Line 25.
  • If you use the actual-expense home office method, the utilities allocable to the home office are part of the indirect expense calculation on Form 8829, not Line 25.

IRS source

Sch C (Form 1040) Instructions; Pub 587; IRS.gov Guide to Business Expense Resources

Source checked · Jul 2026

24

Other Business Expenses

Schedule C

Line 27b: Other Expenses

Key rule

  • Expenses are deductible if they are ordinary and necessary for your business and not deducted anywhere else on Schedule C.
  • List them in Part V (Other Expenses), and the Part V total (Line 48) goes on Line 27b.
  • Business gifts are limited to $25 per recipient per year (IRC §274(b)).
  • Professional dues, trade publications, and safety equipment generally qualify.
  • Not included: business equipment and furniture, permanent improvements, personal, living, and family expenses, charitable contributions, and fines and penalties.
  • Costs you paid or incurred before the day your business began operating, such as market research, launch advertising, or travel to line up your first clients, may be startup costs.
  • Use category 27, Startup Costs (Before You Opened), not this category.

IRS source

Sch C (Form 1040) Instructions: Part V Other Expenses; IRS.gov Guide to Business Expense Resources; IRC §162; IRC §274(b)

Source checked · Jul 2026

25

Depreciation and Section 179 (Equipment > $2,500)

Schedule C

Line 13: Depreciation and section 179 expense deduction

Key rule

  • This line is for property that falls outside the de minimis safe harbor in category 7: more than $2,500 per item or invoice, or more than $5,000 if you have an applicable financial statement.
  • An item that costs exactly $2,500 still falls under that safe harbor.
  • Being over the safe harbor limit does not by itself mean the cost must be capitalized.
  • Property is capitalized, and then depreciated or expensed under section 179, if it has a useful life substantially beyond the tax year.
  • That is the depreciable-property test in the Schedule C Instructions.
  • Stock in trade, inventory, and land are never depreciable, whatever they cost.
  • Qualifying property is recovered through depreciation or expensed with a section 179 election.
  • Both are figured on Form 4562 and entered on Line 13, not Line 27b and not Part III.
  • Form 4562 must be attached if you claim depreciation on property placed in service during the tax year, depreciation on listed property, or a section 179 deduction.

Watch out: This page covers where it goes, not how much.

  • Recovery periods and methods (MACRS), bonus depreciation rates, section 179 dollar and income limits, and rules for vehicles and other listed property are not summarized here.
  • Pub 946 (How To Depreciate Property) is the current IRS guide for them, and it has not been discontinued.
  • A CPA can apply these rules to your situation.

IRS source

Sch C (Form 1040) Instructions; Form 4562 and its Instructions; Pub 946 (How To Depreciate Property, current)

Source checked · Sep 2026

26

Commissions and Fees

Schedule C

Line 10: Commissions and fees

Key rule

  • Commissions and fees you pay to bring in or support business are deductible on Line 10.
  • This includes sales commissions, referral or affiliate payouts, and agent fees.
  • Bank and merchant processing fees are different: they go on Line 27b (see category 2).
  • Per the Schedule C Instructions, do not include commissions or fees that are capitalized or deducted elsewhere on the return.

Watch out: The Form 1099-NEC threshold is now $2,000.

  • For tax years beginning after 2025, payments of $2,000 or more to a payee that is not a corporation require Form 1099-NEC.
  • It was $600 before.
  • The $600 figure applies only to tax years 2025 and earlier (Instructions for Forms 1099-MISC and 1099-NEC, December 2026 revision, What's New and Box 1a: "Enter nonemployee compensation (NEC) of $2,000 or more. Include fees, commissions...").

Watch out: Commissions paid to help sell property are usually capitalized.

  • They generally must be capitalized instead of deducted here.
  • An exception applies to dealers in property.
  • Ask a CPA if that exception might apply to you.

IRS source

Sch C (Form 1040) Instructions; Instructions for Forms 1099-MISC and 1099-NEC; IRC §162

Source checked · Sep 2026

27

Startup Costs (Before You Opened)

Schedule C

Line 27b: Other Expenses (via Part V)

Key rule

  • Startup costs are amounts you paid or incurred before the day your business began operating.
  • Three kinds of costs count under the statute (26 U.S.C. §195(c)
    1. (A)):
    2. investigating the creation or acquisition of an active trade or business
    3. actually creating that trade or business
    4. a profit-seeking activity you carry on before that day, in anticipation of it becoming one.
  • A cost must also pass a same-field test.
  • An existing business "in the same field as the trade or business referred to in subparagraph (A)" must have been able to deduct the cost.
  • It must have been deductible "for the taxable year in which paid or incurred" (§195(c)(1)(B)).
  • Examples: market analysis, advertising for the opening, and travel to line up suppliers or customers.
  • Wages for employees you train before opening, plus their instructors, count too (Pub 583; IRS Tax Tip 2021-166).
  • Salaries and fees for executives, consultants, or similar professional services also qualify (IRS Tax Tip 2021-166, which irs.gov now labels historical content).
  • Capital equipment and inventory you buy before opening are not startup costs.
  • Equipment follows the rules in categories 7 and 25 instead.
  • Materials and supplies an existing business would deduct on Line 22 count as startup costs instead.
  • Interest under §163(a) is never a startup cost.
  • Neither are taxes under §164, or research or experimental costs under §174 or §174A (§195(c)(1), as amended by Pub. L. 119-21, 2025).
  • In the year your business begins, up to $5,000 may be deducted.
  • That amount drops dollar for dollar once your total startup costs pass $50,000.
  • It never goes below zero.
  • You deduct the rest evenly.
  • The period is 180 months, starting the month your business begins (§195(b)(1)).
  • You're deemed to have chosen this method unless you elect instead to capitalize the costs, and either choice is irrevocable (Treas. Reg. §1.195-1(b)).
  • No statement is needed to make the election (Form 4562 Instructions, Startup and organizational costs).
  • If you amortize, Form 4562 line 43 requires attaching a statement.
  • It must list seven things: a description of the costs, the date amortization began, and the amortizable amount, plus the Code section, the amortization period, the amount amortized so far, and this year's amount.
  • Worked example (Treas. Reg. §1.195-1(c), Example 2): $41,000 of startup costs, business begins July 1.
  • That gives $5,000 plus $36,000 ÷ 180 × 6 = $1,200.
  • So $6,200 is deducted the first year.
  • Report the deduction and any amortization in Part V, carried to Line 27b.
  • For the year amortization begins, complete and attach Form 4562 (Sch C Instructions, Part V).
  • In later years, you may not need Form 4562.
  • If so, report the amortization directly on the Other Expenses line instead (Form 4562 Instructions, Line 43).
  • Say the business is fully disposed of before the 180 months end.
  • You may then deduct the remaining deferred amount, to the extent §165 allows (§195(b)(2)).
  • Organizational costs (§248, §709) apply to corporations and partnerships, not Schedule C filers.

Watch out: Buying an existing business works differently.

  • Of the costs of buying an existing business, only investigatory costs qualify: a general search or preliminary investigation.
  • Which side a cost falls on depends on the facts and circumstances of the deal (Rev. Rul. 99-23; IRS Tax Tip 2021-166).
  • Entity-formation fees, like forming an LLC, aren't addressed by these sources.
  • Ask your CPA whenever an amount must be amortized, or you're paying entity-formation fees.

IRS source

26 U.S.C. §195; Treas. Reg. §1.195-1; Sch C (Form 1040) Instructions: Business startup costs and Part V Amortization; Instructions for Form 4562: Startup and organizational costs, Line 43; IRS Tax Tip 2021-166; Pub 583; Rev. Rul. 99-23

Source checked · Sep 2026

28

Supplies and Materials

Schedule C

Line 22: Supplies

Key rule

  • Materials and supplies you use up doing your work go on Line 22 (Supplies).
  • Workshop materials, backdrop paper, and consumables used on a client job are typical.
  • The Schedule C Instructions set the test.
  • They are deductible to the extent you actually use and consume them in the business during the tax year.
  • Incidental materials and supplies you keep on hand, with no inventories or records of use, may be deducted when purchased, if that method clearly reflects income.
  • Books, professional instruments, and equipment normally used within a year also qualify.
  • Items whose usefulness extends substantially beyond a year are instead recovered through depreciation or the de minimis safe harbor.
  • See categories 7 and 25.
  • Goods you sell, and materials that become part of what you sell, are inventory.
  • They belong in cost of goods sold in Part III, not Line 22.
  • A small business taxpayer can choose not to keep an inventory.
  • That taxpayer must still use a method of accounting for inventory that clearly reflects income, such as treating inventory as nonincidental material or supplies.
  • This workbook doesn't track inventory, so ask your CPA how to handle it.
  • Office supplies and postage go on Line 18 (category 15) instead.
  • Materials and supplies you pay for before the day your business began operating are startup costs.
  • See category 27.

IRS source

Sch C (Form 1040) Instructions: Line 22 and Part III

Source checked · Sep 2026

Which deductions don't go on Schedule C?

Health Insurance Premiums, and Retirement Contributions do not file on Schedule C in this reference. Their cards use a different label and show the Form 1040 route instead.

How do I know these are current?

Each card shows the source it was verified against and the month of that check. Before you file, open the source and confirm the rule still fits your facts.

Workbook Tie-In

Tracking your business?

The Bookkeeping Tracker uses these categories to keep your expenses organized with Schedule C context attached.

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Reference only. Not tax advice.

This page is an educational reference for self-employed deduction categories. Verify the source before you file, and consult a licensed tax professional for advice on your specific situation.