Schedule C Tax Deductions
The Internal Revenue Service's Schedule C is used to report profit or loss from a business or sole proprietorship. This includes income earned as a freelancer or home-based business. To reduce your tax liability, you can claim deductions against your business income for all business-related expenses. To simplify the process of completing the Schedule C, keep receipts and records throughtout the tax year.
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Cost of Goods
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If your business involves the purchase of items that are resold for profit, you should claim the amount you paid for the goods during the tax year. The cost you spent on goods will reduce your gross profit by the amount you paid for the goods.
Operating Expenses
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All operating expenses are deductible on the Schedule C form. Operating expenses may include rent or lease costs associated with the business location or business equipment, depreciation of office furniture or equipment, utilities, supplies, business license fees, business insurance, legal fees, cleaning service fees, and interest paid on business loans such as a loan for computer. Supplies may include computer ink, computer software, copy paper, notepads, postage, pens, pencils and any other supplies needed to run your business.
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Automotive and Travel Expenses
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You can either deduct actual automobile expenses by adding up actual expenses such as repairs, maintenance, gasoline expense, insurance and license plates or you can take deduct the standard mileage rate for every business mile. As of 2010, the standard mileage rate is 50 cents per mile. You can also deduct the cost of meals eaten while on business trips and the cost of travel expenses such as lodging. You can also deduct the cost of meals if you were conducting business or entertaining clients during the meal.
Employee Deductions
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If you pay others to complete tasks or to work as a regular part of your business, you can deduct the amount you paid for contract labor or for employee wages. If you provide your employees with fringe benefits such as health insurance and retirement benefits, you can also deduct those expenses.
Home Office Deductions
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Use Form 8829 to claim deductions for the business use of your home. Home office expenses may include office phone line and Internet service. Some deductions are calculated based on the percentage of your home that is used for business. Such deductions include household utilities, mortgage interest, property taxes, and household repairs. Once you calculate the expenses related to your home office, enter the home office deduction on your Schedule C.
Other Deductions
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In the Other Deductions sections, you can claim expenses such as website hosting fees, dues paid for membership to professional organizations, professional publication subscriptions, books used for business research or development, fees paid in order to process customer payments, business-related gifts, and holiday parties for employees. If you have any other miscellaneous expenses, you can create your own categories to deduct those expenses.
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