You’re probably aware that if you run a small business — any activity that earns you money — which you have to handle the taxes on, that you have to both claim that income, and can write off expenses related to that business which reduces the amount of tax you have to pay.
The Schedule C (an IRS form you can find here or in your tax software) has a very specific way it puts the expenses you can write off into groups, and you have to follow it.
What can I write off?
These are the buckets of deduction types you’ll need to get your expenses into to deduct them on a Schedule C form:
- Line 8: Advertising and promotion
- Line 9: Car and truck expenses
- Line 10: Commissions and fees
- Line 11: Contract labor
- Line 12: Depletion – For certain oil, gas, mineral, and timber properties
- Line 13: Depreciation and section 179 expense deduction
- Line 14: Employee benefit programs
- Line 15: Insurance
- Line 16: Interest
- Mortgage (paid to banks, etc.)
- Line 17: Legal and professional Services
- Accounting, consulting fees, tax preparation for Schedule C and related schedules, etc.
- Line 18: Office expense
- Bottled water
- Janitorial service
- Other office services
- Line 19: Pension and profit-sharing plans
- Line 20: Rent or lease
- For vehicles, machinery, and equipment
- Other business property – Use this line for amount paid for rent or lease of office space in a building.
- Line 21: Repairs and maintenance
- Line 22: Supplies
- Line 23: Taxes and licenses
- Line 24: Travel, meals, and entertainment
- Deductible meals and entertainment (50% deductible)
- Line 25: Utilities – electricity, water, telephone
- Line 26: Wages (for others)
- Line 27: Other expenses***
- Line 30: Home office deduction – Complete Form 8829 Form 8829 instructions
What the HECKAROO do these all mean? I liked this explanation of Schedule C income and expenses a LOT , and also found this explanation helpful.
Not only is the Schedule C form not acclimated to the 21st century – and the IRS knows it – but each industry has different, additional expenses which qualify as write-offs. For example, an entertainer can subtract makeup, costumes and pantyhose. (Also I once heard that Michelle Tea writes off her tattoos as “image maintenance” and that is also legit! The Other category just needs you to DOCUMENT the legitimate expense with …. You guessed it – a receipt.)
There are lots of details and specifics to using Schedule C, but there are also tons of resources. This one, by the Chicago Artists Resource Center is specifically for artists.
This 100-page book by the National Association for the Self-Employed is a fantastic guide. (check out pages 64-66 for more on the “Other” category.)