The shape of the form
Part I is income. Part II is expenses, and it is the part that takes the work. Parts III to V handle cost of goods sold, vehicle information and anything that did not fit above.
Net profit from the bottom of the form flows onto your 1040 and becomes the base for self-employment tax. Every line above it therefore reduces two taxes rather than one.
The lines people use most
The expense lines are specific, and an expense does not become deductible by being business-related. It becomes deductible by belonging somewhere.
- Line 8, advertising: ads, sponsorships, promotional material.
- Line 9, car and truck expenses: either the standard mileage rate or actual costs, not both.
- Line 11, contract labor: what you paid contractors, and the figure that drives who needs a 1099.
- Line 15, insurance other than health: business liability and professional cover, not your own health premiums.
- Line 17, legal and professional services: including what you pay to have this form prepared.
- Line 18, office expense: consumables and software rather than equipment.
- Line 20, rent or lease: including equipment; the home office goes elsewhere.
- Line 24a, travel: transport and lodging away from home overnight.
- Line 24b, deductible meals: subject to its own limit and its own substantiation rules.
- Line 27a, other expenses: itemised in Part V rather than left as a lump.
The ones most often got wrong
Health insurance premiums are not a Schedule C expense for a sole proprietor. They come off on the personal return as an adjustment, which is a better outcome than it sounds but a different line entirely.
The home office is not line 20. It has its own calculation and its own form, and it is limited by the profit of the business.
Equipment is generally not an expense line at all. It is capitalised and depreciated, though elections exist that let much of it be deducted at once.
Meals and entertainment are not the same thing. Entertainment is not deductible; meals are, at a limit, and only with the business purpose recorded.
Why the line matters more than the category
Most bookkeeping tools let you invent categories, then ask you to map them to lines at the end of the year. The mapping is where the errors happen, because it is done months later, in bulk, by somebody trying to finish.
Recording the line at the point of the charge is not more work. It is the same decision made once, at the moment you still remember what the charge was for.