💼 The Ultimate Schedule C Guide for Freelancers & Solopreneurs in 2025
If you’re a freelancer, gig worker, or run your own side hustle, one IRS form can make or break your tax season — Schedule C (Form 1040), Profit or Loss from Business.
It’s not just about reporting income; it’s how you legally turn your everyday expenses into powerful tax deductions.
This post breaks down how Schedule C works, what expenses you can deduct, and how to avoid common mistakes when filing in 2025.
1️⃣ What Is Schedule C?
Schedule C (Form 1040) is used by self-employed individuals to report their business income and expenses.
It shows your net profit or loss from your sole proprietorship or single-member LLC and feeds that number into your Form 1040 and Schedule SE (Self-Employment Tax).
In other words, it tells the IRS how much you really earned after deductions — and how much tax you owe.
2️⃣ Who Needs to File Schedule C?
- You received Form 1099-NEC or had gig income instead of a W-2 job.
- You run a side business — consulting, design, photography, online sales, etc.
- You own a Single-Member LLC taxed as a disregarded entity.
Partnerships file Form 1065, S corporations use Form 1120-S, and C corporations use Form 1120.
If you operate alone without incorporation, Schedule C is your go-to form.
3️⃣ Form Structure & Key Sections
Schedule C is divided into five sections:
- Part I — Income: Gross receipts, returns, and allowances.
- Part II — Expenses: Ordinary and necessary business expenses.
- Part III — Cost of Goods Sold (COGS): For product sellers with inventory.
- Part IV — Vehicle Information: Mileage or actual auto expenses.
- Part V — Other Expenses: Breakdown of miscellaneous deductions.
For 2025, the standard mileage rate has increased to 70 cents per mile.
Apps like MileIQ or QuickBooks Mileage Tracker can automate record-keeping and protect you in case of an audit.
4️⃣ Top Tax-Deductible Business Expenses
Every dollar you spend on running your business matters — if you document it properly.
Here are the most common deductions freelancers claim on Schedule C:
- 📢 Advertising & Marketing — website hosting, social media ads, branding.
- 🚗 Vehicle Expenses — mileage or actual costs (choose one method each year).
- 🏠 Home Office Deduction — if you use a separate space exclusively for work.
- 💻 Software & Subscriptions — Canva, Adobe Creative Cloud, Zoom, QuickBooks.
- 🧾 Professional Services — accountant, EA, tax consultant fees.
- 📶 Phone & Internet — business-use percentage only.
- 🧯 Business Insurance — general liability or errors & omissions coverage.
Alex, a freelance web developer, earned $85,000 in 2025.
He spent $12,000 on equipment and software, $6,000 on advertising, and $2,500 on home office utilities.
After $20,500 in deductions, his net profit is $64,500.
That amount flows to Schedule SE, where self-employment tax (≈ 15.3%) is calculated.
5️⃣ Example — How Deductions Lower Your Taxable Income
Imagine Samantha, a freelance photographer.
She earns $60,000 from weddings and portraits.
Her business expenses include camera gear ($8,000), travel ($3,000), insurance ($1,200), and software ($1,800).
Her deductions total $14,000, reducing her taxable net income to $46,000 — saving over $2,000 in taxes compared to reporting gross income.
6️⃣ EA Pro Tips for a Smooth Filing
- 💾 Keep digital copies of all receipts for at least three years (IRS can audit retroactively).
- 💳 Separate personal and business spending — use a dedicated business account.
- 📆 Pay quarterly estimated taxes to avoid penalties (Form 1040-ES).
- 📈 If your income grows, consider electing S-Corp status to save on self-employment taxes.
7️⃣ FAQ — Common Questions About Schedule C
Q1. Can I file Schedule C if I also have a W-2 job?
A. Yes. You’ll report both on your Form 1040 — W-2 wages and Schedule C income are combined for tax purposes.
Q2. What if my business shows a loss?
A. You can report the loss and deduct it against other income, as long as your business is operated with a profit motive.
Consistent losses may trigger the IRS “hobby loss” rule.
Q3. Is the home office deduction a red flag?
A. Not anymore. It’s common for remote workers and freelancers. Just ensure your workspace is used exclusively for business.
The IRS looks for consistent record-keeping and a clear profit intent. Maintain books, invoices, and bank records to defend your deductions if audited.
🔗 Reference Links
- IRS — About Schedule C (Form 1040)
- IRS Publication 535 — Business Expenses
- IRS — Schedule SE (Self-Employment Tax)