1 Department of the Treasury Internal Revenue Service 2018 Instructions for Schedule C. Profit or Loss Use Schedule C (Form 1040) to report income or (loss) from a Business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a Business if From Business your primary purpose for engaging in the activity is for income or Profit and you are involved in the activity with continuity and regularity. For example, a sporadic activity or a hobby does not qualify as a Business . To report income from a nonbusiness activi- ty, see the instructions for Schedule 1 (Form 1040), line 21, or Form 1040NR, line 21. Also, use Schedule C to report (a) wages and expenses you had as a statutory em- ployee, (b) income and deductions of certain qualified joint ventures, and (c) certain income shown on Form 1099-MISC, Miscellaneous Income. See the Instructions for Recipient (back of Copy B of Form 1099-MISC) for the types of income to report on Schedule C.
2 Small businesses and statutory employees with Business expenses of $5,000 or less may be able to file Schedule C-EZ instead of Schedule C. See Schedule C-EZ for de- tails. You may be subject to state and local taxes and other requirements such as Business licenses and fees. Check with your state and local governments for more information. Section references are to the Internal 461 and its instructions for details on the information about deducting Business Revenue Code unless otherwise noted. excess Business loss limitation. meal expenses. Deduction for qualified Business in- Expired employment credits. At the Future Developments come. For tax years beginning after time these instructions went to print, the For the latest information about devel- 2017, you may be entitled to a deduction empowerment zone employment credit opments related to Schedule C and its of up to 20% of your qualified Business and the Indian employment credit had instructions, such as legislation enacted income from your qualified trade or expired.
3 If extended for 2018, claiming after they were published, go to businesses plus 20% of the aggregate these credits could affect the amount ScheduleC. amount of qualified real estate invest- you can deduct on line 26. To find out if ment trust (REIT) dividends and quali- legislation extended these credits, go to What's New fied publicly traded partnership income. The deduction is subject to various limi- Standard mileage rate. The Business Small Business taxpayers. For tax tations, such as limitations based on the standard mileage rate for 2018 increased years beginning after 2017, more small type of your trade or Business , your tax- to cents per mile. Business taxpayers (defined later in Part able income, the amount of W-2 wages III) may qualify to use the cash method of accounting and be exempt from capi- paid with respect to the qualified trade or Business , and the unadjusted basis of Reminders talizing certain expenses under section qualified property held by your trade or Small Business and Self-Employed 263A.
4 In addition, small Business tax- Business . You will claim this deduction (SB/SE) Tax Center. Do you need help payers may not be required to account on Form 1040, not on Schedule C. Un- with a tax issue or preparing your return, for inventories under section 471 and are like other deductions, this deduction can or do you need a free publication or not subject to the Business interest ex- be taken in addition to the standard or form? SB/SE serves taxpayers who file pense limitation. itemized deductions. For more informa- Form 1040, Schedules C, E, F, or Form Excess Business loss limitation. If you tion, see the Instructions for Form 1040 2106, as well as small Business taxpay- report a loss on line 31 of your Sched- and Pub. 535. ers with assets under $10 million. For ule C (Form 1040), you may be subject Business interest expense limitation. additional information, visit the Small to a new Business loss limitation.
5 The For tax years beginning after 2017, your Business and Self-Employed Tax Center disallowed loss resulting from this new Business interest expense deduction may at limitation will not be reflected on be limited. See Limitation on Business Sharing Economy Tax Center. The line 31 of your Schedule C. Instead, use interest under Lines 16a and 16b, later, sharing (or on-demand, gig, or access). the new Form 461 to determine the for more information. economy refers to an emerging area of amount of your excess Business loss, Deductions for Business meal and en- activity that involves people using tech- which will be included as income on tertainment expenses. You can no lon- nology advancements to arrange transac- Schedule 1 (Form 1040), line 21. Any ger deduct entertainment expenses. You tions that generate revenue from sharing disallowed loss resulting from this limi- may still deduct 50% of your Business assets or providing services upon re- tation will be treated as a net operating meal expenses that are not entertainment quest.
6 Visit to get more loss that must be carried forward and de- expenses. See Line 24b, later, for more information about the tax consequences ducted in a subsequent year. See Form of participating in the sharing economy. C-1. Nov 16, 2018 Cat. No. 24329W. You and your spouse wholly own General Single-member limited liability com- pany (LLC). Generally, a single-mem- the unincorporated Business as commun- Instructions ber domestic LLC is not treated as a sep- ity property and you treat the Business as a sole proprietorship. See Community arate entity for federal income tax Other Schedules and Forms purposes. If you are the sole member of Income, later. Otherwise, use Form 1065. See Pub. 541. You May Have To File a domestic LLC, file Schedule C or for information about partnerships. C-EZ (or Schedule E or F, if applicable). Schedule A (Form 1040) to deduct unless you have elected to treat the do- interest, taxes, and casualty losses not Qualified Joint Venture related to your Business .
7 Mestic LLC as a corporation. See Form 8832 for details on making this election Schedule E (Form 1040) to report and for information about the tax treat- You and your spouse can elect to treat an unincorporated Business as a quali- rental real estate and royalty income or (loss) that is not subject to ment of a foreign LLC. fied joint venture instead of a partner- self-employment tax. Single-member limited liability com- ship if you: Schedule F (Form 1040) to report panies (LLCs) with employees. A sin- Each materially participate in the Profit or (loss) from farming. gle-member LLC must file employment Business (see Material participation, lat- Schedule J (Form 1040) to figure tax returns using the LLC's name and er, in the instructions for line G), your tax by averaging your farming or employer identification number (EIN) Are the only owners of the busi- fishing income over the previous 3 rather than the owner's name and EIN, ness, and years.
8 Doing so may reduce your tax. even if the LLC is not treated as a sepa- File a joint return for the tax year. Schedule SE (Form 1040) to pay rate entity for federal income tax purpo- Making the election will allow you to self-employment tax on income from ses. avoid the complexity of Form 1065, but any trade or Business . Heavy highway vehicle use tax. If you still give each of you credit for social se- Form 461 to report your excess use certain highway trucks, truck-trail- curity earnings on which retirement ben- Business loss. ers, tractor-trailers, or buses in your efits, disability benefits, survivor bene- Form 3800 to claim any of the trade or Business , you may have to pay a fits, and insurance (Medicare) benefits general Business credits. federal highway motor vehicle use tax. are based. In most cases, this election Form 4562 to claim depreciation See the Instructions for Form 2290 to will not increase the total tax owed on (including the special allowance) on find out if you must pay this tax and vis- the joint return.
9 Assets placed in service in 2018, to claim it for the most recent Jointly owned property. You and your amortization that began in 2018, to developments. spouse must operate a Business to make make an election under section 179 to Information returns. You may have to this election. Do not make the election expense certain property, or to report file information returns for wages paid for jointly owned property that is not a information on listed property. to employees, certain payments of fees trade or Business . Form 4684 to report a casualty or and other nonemployee compensation, Making the election. To make this theft gain or (loss) involving property interest, rents, royalties, real estate trans- used in your trade or Business or election, divide all items of income, actions, annuities, and pensions. See gain, loss, deduction, and credit attribut- income-producing property.
10 Line I, later, and the 2018 General In- able to the Business between you and Form 4797 to report sales, structions for Certain Information Re- your spouse based on your interests in exchanges, and involuntary conversions turns for details and other payments that (not from a casualty or theft) of trade or the Business . Each of you must file a may require you to file a Form 1099. separate Schedule C, C-EZ, or F. Enter Business property. If you received cash of more than your share of the applicable income, de- Form 6198 to apply a limitation to $10,000 in one or more related transac- duction or (loss), on the appropriate your loss if you have a Business loss and you have amounts invested in the tions in your trade or Business , you may lines of your separate Schedule C, C-EZ, Business for which you are not at risk. have to file Form 8300. For details, see or F. Each of you also may need to file a Pub.