Schedule C for Contractors:
A Line-by-Line Filing Guide

What Schedule C is and who files it

Schedule C, "Profit or Loss From Business," is the form you attach to your Form 1040 to report income and expenses from a business you run yourself. It is for sole proprietors and single-member LLCs — the contractor working under their own name or a one-owner company that has not elected to be taxed as a corporation.

A single-member LLC with no S-corp or C-corp election is what the IRS calls a "disregarded entity." For tax purposes the LLC is ignored and you file a Schedule C exactly like a sole proprietor — the LLC does not change which form you use.

The whole point of the form is one number. You add up income in Part I, subtract your business expenses in Part II, and the difference is your net profit on Line 31. That number flows to Form 1040 (where income tax is figured) and to Schedule SE (where self-employment tax is figured). For the SE-tax math itself, see our self-employment tax guide.

Part I — Income: what counts and where it goes

Line 1 — Gross receipts or sales. This is everything your business took in for the year: all of it, not just the amounts that landed on a 1099-NEC. The new $2,000 1099 reporting threshold does not change what you owe; you report every dollar from your own records. For the 1099 mechanics themselves, see our 1099 contractor taxes guide.

Line 4 — Cost of goods sold. If you carry materials or inventory, the total you calculate in Part III lands here. For most pure-labor contractors this line is blank; for trades that supply materials it can be large.

Line 7 — Gross income. Line 1 minus returns (Line 2) minus cost of goods sold (Line 4), plus any other income (Line 6). This is the income figure your Part II expenses come off of.

Part II — Expenses: the lines contractors use most

Part II is where your deductions live. Each expense goes on a specific numbered line, and putting it on the right line keeps your return clean and your audit risk low. Below are the lines that do the heavy lifting for a tradesperson, and what belongs on each.

A standout is Line 13, depreciation and Section 179. Section 179 lets you deduct the full cost of qualifying equipment in the year you buy it instead of depreciating it over years. The 2026 expensing limit is $2,560,000 under the One Big Beautiful Bill Act. You report it through Form 4562 and carry the total to Line 13.

Part III — Cost of Goods Sold: materials and inventory

Part III is for contractors who supply materials or hold inventory, not just labor. If you buy parts, fixtures, lumber, or HVAC units and install them on jobs, the cost of those materials is figured here and the total carries to Line 4 in Part I.

The Part III formula is simple: beginning inventory, plus purchases during the year, plus materials and supplies and labor used in production, minus ending inventory. The result is your cost of goods sold — the materials that actually went into the work you billed for this year.

If you are a pure-labor trade and carry no inventory, leave Part III and Line 4 blank. Materials you buy and use up immediately on a job can instead be deducted as supplies on Line 22. When in doubt about which side a cost belongs on, that is the kind of judgment call we make for clients every season.

Part IV — Vehicle: the two methods and how to choose

Part IV captures the details behind your Line 9 car and truck deduction: the date you put the vehicle in service, your business and total miles, and whether you have records to back it up. The deduction itself comes from one of two methods, and you choose.

Standard mileage multiplies your business miles by the IRS rate, which is $0.725 per mile for 2026. It is simple and needs only a mileage log. Actual expenses deducts the business-use share of gas, repairs, insurance, and depreciation. For a heavy work truck over 6,000 lbs, the actual method paired with Section 179 or bonus depreciation often deducts far more in year one.

The catch: if you want the standard mileage rate, you generally have to use it the first year the vehicle is in service. Pick wrong in year one and you can lock yourself out of the better method. This is a decision worth running both ways before you file.

Home office: Line 30, two ways to calculate it

If you use part of your home regularly and exclusively for the business — running scheduling, invoicing, and estimates — you can deduct it on Line 30. A qualifying home office can also turn drives from home to job sites into deductible business mileage.

There are two ways to figure it. The regular method uses Form 8829 to deduct the actual business-use share of rent or mortgage interest, utilities, insurance, and depreciation. The simplified method skips the form: you deduct $5 per square foot, up to 300 square feet, for a maximum of $1,500.

The regular method usually deducts more if your home costs are high, but it takes records and the extra form. The simplified method is faster and cleaner. You can choose the better one year to year.

The Schedule C mistakes that cost contractors most

Putting self-employed health insurance on Schedule C. It does not go here. Your health-insurance premiums are deducted as an adjustment on Schedule 1 (Form 1040), not on a Part II expense line. Placed on Schedule C, the deduction is wrong and you can lose the benefit entirely.

Putting state income tax on Line 23. Line 23 is "taxes and licenses" for business taxes — your trade permits, licenses, and employer payroll taxes. Your personal state income tax does not belong there; it is an itemized deduction on Schedule A, subject to its own limits.

Mixing personal and business. Only the business-use share of a vehicle, phone, or home counts. Deducting 100% of a truck you also drive personally, or a phone the family uses, is a fast way to draw a notice.

Skipping Form 4562 for big equipment. Section 179 and depreciation flow to Line 13 only through Form 4562. Leave the form off and the deduction has no support behind it.