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                                                    i1040x
AH XSL/XML              Fileid: … form-1040)/2023/a/xml/cycle12/source                                (Init. & Date) _______
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Department of the Treasury
Internal Revenue Service

2023 Instructions for Schedule C
                                              Use Schedule C (Form 1040) to report income or (loss) from a business you operated 
Profit or Loss                                or a profession you practiced as a sole proprietor. An activity qualifies as a business if 
                                              your primary purpose for engaging in the activity is for income or profit and you are 
From Business                                 involved in the activity with continuity and regularity. For example, a sporadic activi-
                                              ty, a not-for-profit activity, or a hobby does not qualify as a business. To report income 
                                              from a nonbusiness activity, see the instructions for Schedule 1 (Form 1040), line 8j.
                                              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 
                                              amounts  shown  on  a  Form  1099,  such  as  Form  1099-MISC,  Form  1099-NEC,  and 
                                              Form  1099-K.  See  the  instructions  on  your  Form  1099  for  more  information  about 
                                              what to report on Schedule C.
                                              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        cial  clean  vehicle  may  qualify  for  a    Form 1040, 1040-SR, Schedules C, E, F, 
Revenue Code unless otherwise noted.          clean vehicle tax credit. See Form 8936       or Form 2106, as well as small business 
                                              and  its  instructions  for  more  informa-   taxpayers with assets under $10 million. 
Future Developments                           tion.                                         For  additional  information,  go  to  the 
For  the  latest  information  about  devel-                                                Small Business and Self-Employed Tax 
opments  related  to  Schedule  C  and  its   Reminders                                     Center at IRS.gov/SmallBiz.
instructions,  such  as  legislation  enacted 
                                              Gig  economy  tax  center.  The  gig  (or 
after they were published, go to IRS.gov/                                                   General 
                                              on-demand, sharing, or access) economy 
ScheduleC.
                                              refers  to  an  activity  where  people  earn 
                                                                                            Instructions
                                              income  providing  on-demand  work, 
What's New                                    services, or goods. Go to IRS.gov/Gig to      Other Schedules and Forms 
Redesigned  Form  1040-SS.   For  2023,       get more information about the tax con-
                                                                                            You May Have To File
Schedule C (Form 1040) is available to        sequences  of  participating  in  the  gig 
be filed with Form 1040-SS, if applica-       economy.                                      • Schedule A (Form 1040) to deduct 
                                                                                            interest, taxes, and casualty losses not 
ble. It replaces Form 1040-SS, Part IV.       Excess business loss limitation. If you       related to your business.
For  additional  information,  see  the  In-  report a loss on line 31 of your Sched-         Schedule E (Form 1040) to report 
                                                                                            •
structions for Form 1040-SS.                  ule C (Form 1040), you may be subject         rental real estate and royalty income or 
Standard  mileage  rate.   The  business      to a business loss limitation. The disal-     (loss) that is not subject to 
standard  mileage  rate  for  2023  is  65.5  lowed loss resulting from the limitation      self-employment tax.
cents per mile.                               will not be reflected on line 31 of your        Schedule F (Form 1040) to report 
                                                                                            •
                                              Schedule  C.  Instead,  use  Form  461  to 
Business meals deduction.  The tempo-                                                       profit or (loss) from farming.
                                              determine  the  amount  of  your  excess 
rary 100% deduction for food or bever-                                                      • Schedule J (Form 1040) to figure 
                                              business loss, which will be included as 
ages  provided  by  a  restaurant  has  ex-                                                 your tax by averaging your farming or 
                                              income  on  Schedule  1  (Form  1040), 
pired.  The  business  meals  deduction  is                                                 fishing income over the previous 3 
                                              line  8p.  Any  disallowed  loss  resulting 
now 50%.                                                                                    years. Doing so may reduce your tax.
                                              from this limitation will be treated as a       Schedule SE (Form 1040) to pay 
                                                                                            •
Energy efficient commercial buildings         net  operating  loss  that  must  be  carried self-employment tax on income from 
deduction.   The  energy  efficient  com-     forward  and  deducted  in  a  subsequent     any trade or business.
mercial  buildings  deduction  is  now  re-   year.                                           Form 461 to report an excess 
ported on new line 27b.                                                                     •
                                              See Form 461 and its instructions for         business loss.
Bonus depreciation. The bonus depre-          details on the excess business loss limi-     • Form 3800 to claim any of the 
ciation  deduction  under  section  168(k)    tation.                                       general business credits.
begins  its  phaseout  in  2023  with  a  re-                                               • Form 4562 to claim depreciation 
                                              Small  Business  and  Self-Employed 
duction  of  the  applicable  limit  from                                                   and amortization on assets placed in 
                                              (SB/SE) Tax Center. Do you need help 
100% to 80%.                                                                                service in 2023, to claim amortization 
                                              with a tax issue or preparing your return, 
Commercial  clean  vehicle  credit.           or  do  you  need  a  free  publication  or   that began in 2023, to make an election 
Businesses that buy a qualified commer-       form? SB/SE serves taxpayers who file         under section 179 to expense certain 

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property, or to report information on         Heavy highway vehicle use tax.   If you       •    Each  materially  participate  in  the 
listed property.                              use  certain  highway  trucks,  truck-trail-  business (see Material participation, lat-
•  Form 4684 to report a casualty or          ers,  tractor-trailers,  or  buses  in  your  er, in the instructions for line G);
theft gain or (loss) involving property       trade or business, you may have to pay a      •    Are  the  only  owners  of  the  busi-
used in your trade or business or             federal  highway  motor  vehicle  use  tax.   ness; and
income-producing property.                    See  the  Instructions  for  Form  2290  to   •    File a joint return for the tax year.
•  Form 4797 to report sales,                 find out if you must pay this tax and go      Making the election will allow you to 
exchanges, and involuntary conversions        to IRS.gov/Trucker  for  the  most  recent    avoid the complexity of Form 1065, but 
(not from a casualty or theft) of trade or    developments.                                 still give each of you credit for social se-
business property.                                                                          curity earnings on which retirement ben-
                                              Information returns.   You may have to 
•  Form 6198 to apply a limitation to                                                       efits,  disability  benefits,  survivor  bene-
                                              file  information  returns  for  wages  paid 
your loss if you have a business loss and                                                   fits,  and  insurance  (Medicare)  benefits 
                                              to  employees,  and  certain  payments  of 
you have amounts invested in the                                                            are  based.  In  most  cases,  this  election 
                                              fees and other nonemployee compensa-
business for which you are not at risk.                                                     will  not  increase  the  total  tax  owed  on 
                                              tion, interest, rents, royalties, real estate 
•  Form 6252 to report income from                                                          the joint return.
                                              transactions,  annuities,  and  pensions. 
an installment agreement.
                                              See Line I, later, and the 2023 General       Jointly owned property.      You and your 
•  Form 7205 to claim the IRC 179D 
                                              Instructions for Certain Information Re-      spouse must operate a business to make 
deduction for qualifying energy efficient 
                                              turns for details and other payments that     this  election.  Do  not  make  the  election 
commercial building expenses.
                                              may require you to file a Form 1099.          for jointly owned property that is not a 
•  Form 8582 to apply a limitation to 
your loss from passive activities.               If  you  received  cash  of  more  than    trade or business.
•  Form 8594 to report certain                $10,000 in one or more related transac-               Only businesses that are owned 
purchases or sales of groups of assets        tions in your trade or business, you may      !       and  operated  by  spouses  as 
that constitute a trade or business.          have to file Form 8300. For details, see      CAUTION co-owners (and not in the name 
•  Form 8824 to report like-kind              Pub. 1544. See also the IRS Form 8300         of a state law entity) qualify for the elec-
exchanges.                                    Reference  Guide,  available  at IRS.gov/     tion. Thus, a business owned and oper-
•  Form 8829 to claim actual                  Businesses/Small-Businesses-Self-             ated  by  spouses  through  an  LLC  does 
expenses for business use of your home.       Employed/IRS-Form-8300-Reference-             not qualify for the election of a qualified 
•  Form 8936 to claim the                     Guide.                                        joint venture.
commercial clean vehicle credit.
                                              Business Owned and 
•  Form 8960 to pay Net Investment                                                          Making  the  election.       To  make  this 
Income Tax on certain income from             Operated by Spouses                           election,  divide  all  items  of  income, 
your passive activities.                      Generally, if you and your spouse jointly     gain, loss, deduction, and credit attribut-
•  Form 8990 to determine whether             own and operate an unincorporated busi-       able  to  the  business  between  you  and 
your business interest deduction is           ness and share in the profits and losses,     your spouse based on your respective in-
limited.                                      you are partners in a partnership, wheth-     terests in the business. Each of you must 
•  Form 8995 or 8995-A to claim a             er or not you have a formal partnership       file  a  separate  Schedule  C  or  F.  Enter 
deduction for qualified business income.      agreement.  You  generally  have  to  file    your share of the applicable income, de-
Single-member  limited  liability  com-       Form  1065  instead  of  Schedule  C  for     duction,  or  (loss)  on  the  appropriate 
pany (LLC).   Generally, a single-mem-        your  joint  business  activity;  however,    lines of your separate Schedule C or F. 
ber domestic LLC is not treated as a sep-     you may not have to file Form 1065 if         Each of you may also need to file a sep-
arate  entity  for  federal  income  tax      either of the following applies.              arate  Schedule  SE  to  pay  self-employ-
purposes. If you are the sole member of          • You  and  your  spouse  elect  to  be    ment tax. If the business was taxed as a 
a  domestic  LLC,  file  Schedule  C  (or     treated as a qualified joint venture. See     partnership  before  you  made  the  elec-
Schedule  E  or  F,  if  applicable)  unless  Qualified Joint Venture next.                 tion,  the  partnership  will  be  treated  as 
you  have  elected  to  treat  the  domestic     • You  and  your  spouse  wholly  own      terminating  at  the  end  of  the  preceding 
LLC  as  a  corporation.  See  Form  8832     the unincorporated business as commun-        tax year. For information on how to re-
for  details  on  making  this  election  and ity property and you treat the business as    port  the  termination  of  the  partnership, 
for  information  about  the  tax  treatment  a  sole  proprietorship.  See Community       see Pub. 541.
of a foreign LLC.                             Income, later.                                Revoking  the  election.     The  election 
                                              Otherwise, use Form 1065. See Pub. 541        can be revoked only with the permission 
Single-member LLCs with employees.                                                          of  the  IRS.  However,  the  election  re-
                                              for information about partnerships.
A  single-member  LLC  must  file  em-                                                      mains in effect only for as long as you 
ployment  tax  returns  using  the  LLC's                                                   and your spouse continue to meet the re-
name and employer identification num-         Qualified Joint Venture
                                                                                            quirements to make the election. If you 
ber (EIN) rather than the owner's name        You and your spouse can elect to treat an 
                                                                                            and your spouse fail to meet the require-
and EIN, even if the LLC is not treated       unincorporated  business  as  a  qualified 
                                                                                            ments  for  any  year,  you  will  need  to 
as  a  separate  entity  for  federal  income joint venture instead of a partnership if 
                                                                                            make  a  new  election  to  be  treated  as  a 
tax purposes.                                 you:
                                                                                            qualified  joint  venture  in  any  future 
                                                                                            year.

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Employer     identification    number          Reportable Transaction 
(EIN).  You  and  your  spouse  do  not        Disclosure Statement
need to obtain an EIN to make the elec-                                                         Specific 
                                               Use Form 8886 to disclose information 
tion.  But  you  may  need  an  EIN  to  file                                                   Instructions
                                               for each reportable transaction in which 
other returns, such as employment or ex-
                                               you  participated.  Form  8886  must  be 
cise tax returns. To apply for an EIN, see                                                      Filers of Form 1041.     Do not complete 
                                               filed for each tax year that your federal 
the Instructions for Form SS-4 or go to                                                         the block labeled “Social security num-
                                               income  tax  liability  is  affected  by  your 
IRS.gov/EIN.                                                                                    ber  (SSN).”  Instead,  enter  the  EIN  is-
                                               participation in the transaction. You may        sued to the estate or trust on line C.
Rental real estate business.   If you and      have to pay a penalty if you are required 
your spouse make the election for your         to file Form 8886 but do not do so. You 
                                                                                                Line A
rental  real  estate  business,  you  must     may also have to pay interest and penal-
each  report  your  share  of  income  and     ties on any reportable transaction under-        Describe the business or professional ac-
deductions  on  Schedule  E.  Rental  real     statements. The following are reportable         tivity  that  provided  your  principal 
estate  income  is  not  generally  included   transactions.                                    source of income reported on line 1. If 
in  net  earnings  from  self-employment            Any  listed  transaction  that  is  the     you  owned  more  than  one  business, 
                                               •
subject  to  self-employment  tax  and  is     same  as  or  substantially  similar  to  tax    complete a separate Schedule C for each 
generally subject to the passive loss lim-     avoidance transactions identified by the         business. Give the general field or activ-
itation  rules.  Electing  qualified  joint    IRS.                                             ity and the type of product or service. If 
venture status does not alter the applica-          Any transaction offered to you or a         your  general  field  or  activity  is  whole-
                                               •
tion  of  the  self-employment  tax  or  the   related party under conditions of confi-         sale or retail trade, or services connected 
passive loss limitation rules.                 dentiality for which you paid an advisor         with  production  services  (mining,  con-
More  information. For  more  informa-         a fee of at least $50,000.                       struction,  or  manufacturing),  also  give 
tion  on  qualified  joint  ventures,  go  to  •    Certain transactions for which you          the type of customer or client; for exam-
IRS.gov/QJV.                                   or a related party have contractual pro-         ple,  “wholesale  sale  of  hardware  to  re-
                                               tection  against  disallowance  of  the  tax     tailers”  or  “appraisal  of  real  estate  for 
Community Income                               benefits.                                        lending institutions.”
If you and your spouse wholly own an           •    Certain  transactions  resulting  in  a 
                                               loss of at least $2 million in any single 
unincorporated  business  as  community                                                         Line B
                                               tax year or $4 million in any combina-
property under the community property                                                           Enter on line B the six-digit code from 
                                               tion of tax years. (At least $50,000 for a 
laws of a state, foreign country, or U.S.                                                       the Principal  Business  or  Professional 
                                               single tax year if the loss arose from a 
territory,  you  can  treat  your  wholly                                                       Activity Codes chart at the end of these 
                                               foreign  currency  transaction  defined  in 
owned,  unincorporated  business  as  a                                                         instructions.  For  nonstore  retailers,  se-
                                               section  988(c)(1),  whether  or  not  the 
sole proprietorship, instead of a partner-                                                      lect the PBA code by the primary prod-
                                               loss  flows  through  from  an  S  corpora-
ship. Any change in your reporting posi-                                                        uct that your establishment sells. For ex-
                                               tion or partnership.)
tion  will  be  treated  as  a  conversion  of                                                  ample,  establishments  primarily  selling 
the entity.                                    •    Certain transactions of interest en-        prescription and non-prescription drugs, 
                                               tered into that are the same or substan-         select PBA code 456110 Pharmacies & 
Report  your  income  and  deductions          tially similar to one of the types of trans-     drug retailers.
as follows.                                    actions  that  the  IRS  has  identified  by 
•   If  only  one  spouse  participates  in    published  guidance  as  a  transaction  of 
the business, all of the income from that      interest.                                        Line D
business  is  the  self-employment  earn-                                                       Enter on line D the EIN that was issued 
ings  of  the  spouse  who  carried  on  the   See  the  Instructions  for  Form  8886          to you on Form SS-4. Do not enter your 
business.                                      for more details.                                SSN  on  this  line.  Do  not  enter  another 
•   If both spouses participate, the in-                                                        taxpayer's  EIN  (for  example,  from  any 
                                               Capital Construction Fund
come and deductions are allocated to the                                                        Forms 1099-MISC that you received). If 
spouses  based  on  their  distributive        Do not claim on Schedule C the deduc-            you do not have an EIN, leave line D 
shares.                                        tion for amounts contributed to a capital        blank.
•   If either or both spouses are part-        construction  fund  set  up  under  chap-
ners in a partnership, see Pub. 541.           ter  535  of  title  46  of  the  United  States You need an EIN only if you have a 
•   If both spouses elected to treat the       Code.  Instead,  reduce  the  amount  you        qualified retirement plan or are required 
business  as  a  qualifying  joint  venture,   would otherwise enter on Form 1040 or            to file employment, excise, alcohol, to-
see Qualified Joint Venture, earlier.          1040-SR, line 15, by the amount of the           bacco, or firearms returns, or are a payer 
                                               deduction. Next to line 15, enter “CCF”          of  gambling  winnings.  If  you  need  an 
States with community property laws                                                             EIN, see the Instructions for Form SS-4.
                                               and the amount of the deduction. For de-
include Arizona, California, Idaho, Lou-                                                        Single-member  LLCs.     If  you  are  the 
                                               tails, see Pub. 595.
isiana,  Nevada,  New  Mexico,  Texas,                                                          sole owner of an LLC that is not treated 
Washington,  and  Wisconsin.  See  Pub.        Additional Information                           as  a  separate  entity  for  federal  income 
555  for  more  information  about  com-       See Pub.  334  for  more  information  for       tax  purposes,  enter  on  line  D  the  EIN 
munity property laws.                          small businesses.                                that was issued to the LLC (in the LLC's 

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legal  name)  for  a  qualified  retirement      Example. You  change  to  the  cash           that an owner would not customarily do 
plan,  to  file  employment,  excise,  alco-  method of accounting and choose to ac-           in the same type of activity and one of 
hol, tobacco, or firearms returns, or as a    count for inventoriable items in the same        your  main  reasons  for  doing  the  work 
payer of gambling winnings. If you do         manner  as  non-incidental  materials  and       was to avoid the disallowance of losses 
not  have  such  an  EIN,  leave  line  D     supplies for the 2023 tax year. You ac-          or  credits  from  the  activity  under  the 
blank.                                        crued  sales  in  2022  for  which  you  re-     passive activity rules.
                                              ceived  payment  in  2023.  You  must  re-       Work you did as an investor in an ac-
Line E                                        port those sales in both years as a result       tivity  is  not  treated  as  participation  un-
                                              of  changing  your  accounting  method 
Enter  your  business  address.  Show  a                                                       less  you  were  directly  involved  in  the 
                                              and must make a section 481(a) adjust-
street address instead of a box number.                                                        day-to-day management or operations of 
                                              ment to prevent duplication of income.
Include the suite or room number, if any.                                                      the  activity.  Work  performed  as  an  in-
If you conducted the business from your          A  net  negative  section  481  adjust-       vestor includes:
home  located  at  the  address  shown  on    ment  is  generally  taken  into  account  in    •    Studying  and  reviewing  financial 
page  1  of  your  tax  return,  you  do  not the  year  of  change.  A  net  positive  sec-   statements or reports on the activity,
have to complete this line.                   tion 481(a) adjustment is generally taken        •    Preparing or compiling summaries 
                                              into account over a period of 4 years. In-       or analyses of the finances or operations 
                                              clude any net positive section 481(a) ad-        of the activity for your own use, and
Line F                                        justments  on  line  6.  If  the  net  section   •    Monitoring  the  finances  or  opera-
Generally, you can use the cash method,       481(a)  adjustment  is  negative,  report  it    tions of the activity in a nonmanagerial 
an accrual method, or any other method        in Part V.                                       capacity.
permitted by the Internal Revenue Code.       More  information. For  more  informa-           Participation  by  your  spouse  during 
In all cases, the method used must clear-     tion  about  changing  your  accounting          the tax year in an activity in which you 
ly reflect income. Unless you are a small     method  and  the  section  481(a)  adjust-       own an interest can be counted as your 
business  taxpayer  (defined  later  under    ment,  see  the  Instructions  for  Form         participation in the activity. This rule ap-
Part III), you must use an accrual meth-      3115.  Additional  information  is  also         plies even if your spouse did not own an 
od for sales and purchases of inventory       available in various revenue procedures.         interest  in  the  activity  and  whether  or 
items.  Special  rules  apply  to  long-term  See Rev. Proc. 2022-14 (and any subse-           not you and your spouse file a joint re-
contracts  (see  section  460  for  details). quent  revenue  procedures  modifying            turn. However, this rule does not apply 
See also Rev. Proc. 2022-9 for changes        Rev.  Proc.  2022-14)  for  a  list  of  auto-   for purposes of determining whether you 
in  accounting  periods  and  methods  of     matic  changes,  including  a  description       and your spouse can elect to have your 
accounting,  available  at  IRS.gov/irb/      of  its  effect  on  prior  lists  of  automatic business treated as a qualified joint ven-
2022-02_IRB#REV-PROC-2022-9.                  changes. Rev. Proc. 2022-14 is available         ture instead of a partnership (see Quali-
If you use the cash method, show all          at  IRS.gov/irb/2022-07_IRB#REV-                 fied Joint Venture, earlier).
items of taxable income actually or con-      PROC-2022-14.                                    For  purposes  of  the  passive  activity 
structively  received  during  the  year  (in                                                  rules, you materially participated in the 
cash,  property,  or  services).  Income  is  Line G                                           operation of a trade or business activity 
constructively received when it is credi-     If  your  business  activity  is  not  a  rental during  2023  if  you  met  any  of  the  fol-
ted to your account or set aside for you      activity and you meet any of the materi-         lowing seven tests.
to use. Also, show amounts actually paid      al participation tests, explained next, or       1. You  participated  in  the  activity 
during the year for deductible expenses.      the exception  for  oil  and  gas  applies,      for more than 500 hours during the tax 
However, if the payment of an expendi-        check  the  “Yes”  box.  Otherwise,  check       year.
ture creates an asset having a useful life    “No.” If you check “No,” this activity is        2. Your  participation  in  the  activity 
that  extends  beyond  12  months  or  the    passive. If you have a loss from a pas-          for the tax year was substantially all of 
end of the next tax year, it may not be       sive activity, see Limit on losses, later. If    the participation in the activity of all in-
deductible or may be deductible only in       you  have  a  profit  from  the  rental  of      dividuals (including individuals who did 
part  for  the  year  of  the  payment.  See  property  to  a  nonpassive  activity,  see      not own any interest in the activity) for 
chapter  2  of Pub.  334,  Tax  Guide  for    Recharacterization of Passive Income in          the tax year.
Small Business.                               Pub.  925  to  find  out  how  to  report  the 
                                                                                               3. You  participated  in  the  activity 
                                              net income.
For amounts includible in income and                                                           for more than 100 hours during the tax 
deductible  as  expense  under  an  accrual   Material  participation. For  purposes           year,  and  you  participated  at  least  as 
method, see Pub. 538.                         of the seven material participation tests        much  as  any  other  person  for  the  tax 
                                              listed  later,  participation  generally  in-    year. This includes individuals who did 
To  change  your  accounting  method,         cludes  any  work  you  did  in  connection      not own any interest in the activity.
you must generally file Form 3115. You        with an activity, if you owned an interest       4. The  activity  is  a  significant  par-
may also have to make an adjustment to        in  the  activity  at  the  time  you  did  the  ticipation  activity  for  the  tax  year,  and 
prevent  amounts  of  income  or  expense     work. The capacity in which you did the          you participated in all significant partici-
from  being  duplicated  or  omitted.  This   work does not matter. However, work is           pation activities for more than 500 hours 
is called a section 481(a) adjustment.        not treated as participation if it is work       during the year. An activity is a “signifi-

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cant participation activity” if it involves     “No”  box  on  line  G.  In  addition,  your    figure the extraterritorial income exclu-
the conduct of a trade or business, you         rental activity loss may be limited even        sion.  Report  it  on  Schedule  C  as  ex-
participated in the activity for more than      if you materially participated. In gener-       plained  in  the  Instructions  for  Form 
100 hours during the tax year, and you          al,  a  business  activity  in  which  you  do  8873.
did not materially participate under any        not materially participate or a rental ac-
                                                                                                If you were a debtor in a chapter 11 
of the material participation tests (other      tivity is a passive activity and you have 
                                                                                                bankruptcy case during 2023, see Chap-
than this test 4).                              to use Form 8582 to apply a limitation 
                                                                                                ter 11 Bankruptcy Cases in the Instruc-
5. You materially participated in the           that may reduce the loss, if any, that you 
                                                                                                tions for Form 1040 (under Income) and 
activity  for  any  5  of  the  prior  10  tax  may  enter  on  Schedule  C,  line  31.  For 
                                                                                                the Instructions for Schedule SE.
years.                                          details, see Pub. 925.
                                                                                                Be sure to report all income attributa-
6. The activity is a personal service           Note. Line G doesn't apply to filers of         ble  to  your  trade  or  business  from  all 
activity in which you materially partici-       Form 1040-SS.                                   sources.  You  may  receive  one  or  more 
pated  for  any  3  prior  tax  years.  A  per-
                                                                                                Forms  1099  from  people  who  are  re-
sonal service activity is an activity that 
involves performing personal services in        Line H                                          quired to provide information to the IRS 
the field of health, law, engineering, ar-      If  you  started  or  acquired  this  business  listing amounts that may be income you 
chitecture, accounting, actuarial science,      in 2023, check the box on line H. Also,         received as a result of your trade or busi-
performing  arts,  or  consulting,  or  any     check the box if you are reopening or re-       ness activities. The following is a list of 
other trade or business in which capital        starting  this  business  after  temporarily    some of the common Forms 1099.
is not a material income-producing fac-         closing  it,  and  you  did  not  file  a  2022 •   1099-MISC. For more information 
tor.                                            Schedule C for this business.                   about  what  is  reported  on  Form 
                                                                                                1099-MISC, see the       Instructions for Re-
7. Based on all the facts and circum-                                                           cipient included on that form.
stances,  you  participated  in  the  activity  Line I                                          •   1099-NEC.  For  more  information 
on a regular, continuous, and substantial       If  you  made  any  payment  in  2023  that     about  what  is  reported  on  Form 
basis for more than 100 hours during the        would  require  you  to  file  any  Forms       1099-NEC, see the Instructions for Re-
tax year. Your participation in managing        1099,  check  the  “Yes”  box.  Otherwise,      cipient included on that form.
the activity does not count in determin-        check the “No” box.                             •   1099-K.  For  more  information 
ing  if  you  meet  this  test  if  any  person                                                 about what is reported on Form 1099-K, 
(except you) (a) received compensation          You may have to file information re-
for  performing  management  services  in       turns for wages paid to employees, cer-         see  the Instructions  for  Payee  included 
connection with the activity, or (b) spent      tain payments of fees and other nonem-          on that form and go to IRS.gov/Gig.
more hours during the tax year than you         ployee  compensation,  interest,  rents,                 Income  you  report  on  Sched-
spent  performing  management  services         royalties, real estate transactions, annui-     TIP      ule C may be qualified business 
in  connection  with  the  activity  (regard-   ties, and pensions. You may also have to                 income and entitle you to a de-
less of whether the person was compen-          file  an  information  return  if  you  sold    duction  on  Form  1040  or  1040-SR, 
sated for the services).                        $5,000 or more of consumer products to          line  13.  See  Forms  8995  and  8995-A, 
                                                a  person  on  a  buy-sell,  a  deposit-com-    and      IRS.gov/Newsroom/Facts-About-
Rental of personal property.    General-        mission, or other similar basis for resale.     the-Qualified-Business-Income-
ly,  a  rental  activity  (such  as  long-term                                                  Deduction.
equipment leasing) is a passive activity        Note.  Line I doesn't apply to filers of 
even if you materially participated in the      Form 1040-SS.
activity. However, if you met any of the               The  Guide  to  Information  Re-         Line 1
five  exceptions  listed  under Rental  Ac-     TIP    turns  in  the  2023  General  In-       Enter  gross  receipts  from  your  trade  or 
tivities  in  the  Instructions  for  Form             structions for Certain Informa-          business.  Be  sure  to  check  any  Forms 
8582,  the  rental  of  the  property  is  not  tion  Returns  identifies  which  Forms         1099  you  received  for  business  income 
treated as a rental activity and the mate-      1099  must  be  filed,  the  amounts  to  re-   that must be reported on this line.
rial  participation  rules  explained  earlier  port, and the due dates for the required        If  you  received  one  or  more  Forms 
apply.                                          Forms 1099.                                     1099-NEC,  be  sure  line  1  includes 
Exception  for  oil  and  gas.  If  you  are                                                    amounts properly shown on your Forms 
filing Schedule C to report income and                                                          1099-NEC.  If  the  total  amounts  that 
deductions  from  an  oil  or  gas  well  in                                                    were  reported  in  box  1  of  Forms 
which  you  own  a  working  interest  di-      Part I. Income                                  1099-NEC  are  more  than  the  total  you 
rectly or through an entity that does not       Except as otherwise provided in the In-         are  reporting  on  line  1,  attach  a  state-
limit your liability, check the “Yes” box.      ternal  Revenue  Code,  gross  income  in-      ment explaining the difference.
The activity of owning a working inter-         cludes income from whatever source de-          Statutory employees.     If you received a 
est is not a passive activity, regardless of    rived.  In  certain  circumstances,  howev-     Form  W-2,  Wage  and  Tax  Statement, 
your participation.                             er, gross income does not include extra-        and  the  "Statutory  employee"  box  in 
Limit on losses.   Your business activity       territorial income that is qualifying for-      box 13 of that form was checked, report 
loss may be limited if you checked the          eign  trade  income.  Use  Form  8873  to       your income and expenses related to that 

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income on Schedule C. Enter your statu-        A sales allowance is a reduction in the        941 or Form 944 for 2023 for the 
tory  employee  income  from  box  1  of       selling  price  of  products,  instead  of  a  nonrefundable and refundable portions 
Form W-2 on line 1 of Schedule C and           cash or credit refund.                         of this credit that you claimed against 
check the box on that line. Social securi-                                                    your employment taxes.
ty  and  Medicare  tax  should  have  been     Line 6                                         •     Other kinds of miscellaneous 
withheld from your earnings; as a result,                                                     business income.
                                               Report on line 6 business income not re-
you do not owe self-employment tax on 
                                               ported elsewhere in Part I. Be sure to in-     If the business use percentage of any 
these  earnings.  Statutory  employees  in-
                                               clude amounts from the following.              listed  property  (defined  under Line  13, 
clude  full-time  life  insurance  agents, 
certain agent or commission drivers and        • Finance reserve income.                      later)  dropped  to  50%  or  less  in  2023, 
traveling  salespersons,  and  certain         • Scrap sales.                                 report on this line any recapture of ex-
homeworkers.                                   • Bad debts you recovered.                     cess depreciation, including any section 
                                               • Interest (such as on notes and               179  expense  deduction.  Use  Part  IV  of 
If you had both self-employment in-            accounts receivable).                          Form 4797 to figure the recapture. Also, 
come  and  statutory  employee  income,          State gasoline or fuel tax refunds           if  the  business  use  percentage  drops  to 
                                               •
you must file two Schedules C. You can-        you received in 2023.                          50%  or  less  on  leased  listed  property 
not  combine  these  amounts  on  a  single      Any amount of credit for biofuel             (other  than  a  vehicle),  include  on  this 
                                               •
Schedule C.                                    claimed on line 3 of Form 6478.                line any inclusion amount. See chapter 5 
Note.   Statutory  employees  informa-         • Any amount of credit for biodiesel,          of Pub. 946 to figure the amount.
                                               renewable diesel, and sustainable 
tion doesn’t apply to Form 1040-SS fil-
                                               aviation fuel claimed on line 11 of Form 
ers.
                                               8864.
        Qualified joint ventures should        • Credit for federal tax paid on fuels         Part II. Expenses
!       report rental real estate income       claimed on your 2022 Form 1040 or              Capitalizing costs of producing prop-
CAUTION not  subject  to  self-employment      1040-SR.                                       erty  and  acquiring  property  for  re-
tax  on  Schedule  E.  See Qualified  Joint    • Prizes and awards related to your            sale. If  you  produced  real  or  tangible 
Venture, earlier, and the Instructions for     trade or business.                             personal  property  or  acquired  real  or 
Schedule E.                                    • Amounts you received in your                 personal  property  for  resale,  you  must 
                                               trade or business as shown on Form             generally  capitalize  certain  expenses  in 
Installment  sales. Generally,  the  in-       1099-PATR.                                     inventory  or  other  property.  These  ex-
stallment  method  cannot  be  used  to  re-   • The amount of any payroll tax                penses  include  the  direct  costs  of  the 
port income from the sale of (a) personal      credit taken by an employer for qualified      property and any indirect costs properly 
property regularly sold under the install-     paid sick leave and qualified paid family      allocable  to  that  property.  Reduce  the 
ment  method,  or  (b)  real  property  held   leave under the Families First                 amounts on lines 8 through 26, 27b, and 
for resale to customers. But the install-      Coronavirus Response Act (FFCRA),              Part V by amounts capitalized. See Pub. 
ment  method  can  be  used  to  report  in-   and the American Rescue Plan Act of            538 for a discussion of the uniform capi-
come  from  sales  of  certain  residential    2021 (ARP). See Form 941, lines 11b,           talization rules.
lots  and  timeshares  if  you  elect  to  pay 11d, 13c, and 13e, and Form 944, lines 
interest on the tax due on that income af-     8b, 8d, 10d, and 10f. You must include         Exception for a small business tax-
ter the year of sale. See section 453(l)(2)    the full amount (both the refundable and       payer. A small  business  taxpayer  (de-
(B) for details. If you make this election,    nonrefundable portions) of the credit for      fined later under Part III) is not required 
include  the  interest  in  the  total  on     qualified sick and family leave wages in       to capitalize certain expenses to invento-
Schedule  2  (Form  1040),  line  14,  and     gross income for the tax year that             ry  or  other  property.  See  Pub.  538  for 
enter the amount of interest and “453(l)       includes the last day of any calendar          more details.
(3)” on the line next to the entry space.      quarter with respect to which a credit is      Exception  for  creative  property.     If 
If you use the installment method, at-         allowed.                                       you are a freelance artist, author, or pho-
tach  a  statement  to  your  return.  Show                                                   tographer, you may be exempt from the 
                                               Note. A  credit  is  available  only  if  the 
separately for 2023 and the 3 preceding                                                       capitalization rules. However, your per-
                                               leave  was  taken  after  March  31,  2020, 
years:  gross  sales,  cost  of  goods  sold,                                                 sonal efforts must have created (or rea-
                                               and before October 1, 2021, and only af-
gross profit, percentage of gross profit to                                                   sonably be expected to create) the prop-
                                               ter the qualified leave wages were paid, 
gross sales, amounts collected, and gross                                                     erty.  This  exception  does  not  apply  to 
                                               which  might  under  certain  circumstan-
profit on amounts collected.                                                                  any  expense  related  to  printing,  photo-
                                               ces  not  occur  until  a  quarter  after  Sep-
                                                                                              graphic plates, motion picture films, vid-
                                               tember 30, 2021, including quarters dur-
                                                                                              eotapes,  or  similar  items.  These  expen-
Line 2                                         ing  2023.  Accordingly,  all  lines  related 
                                                                                              ses are subject to the capitalization rules. 
Report  your  sales  returns  and  allowan-    to qualified sick and family leave wages 
                                                                                              For  details,  see Uniform  Capitalization 
ces  as  a  positive  number  on  line  2.  A  remain  on  the  employment  tax  returns 
                                                                                              Rules in Pub. 538.
sales  return  is  a  cash  or  credit  refund for 2023.
you gave to customers who returned de-         • Any amount of credit for COBRA 
fective, damaged, or unwanted products.        premium assistance. See your Form(s) 

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                                               4562 for any other reason (see  Line 13, 
Line 9                                         later).                                        Line 13
You  can  deduct  the  actual  expenses  of 
                                                                                              Depreciation and section 179 expense 
operating  your  car  or  truck  or  take  the Line 10                                        deduction.   Depreciation  is  the  annual 
standard mileage rate. This is true even 
                                               Enter the total commissions and fees for 
if you used your vehicle for hire (such as                                                    deduction allowed to recover the cost or 
                                               the  tax  year.  Do  not  include  commis-
a taxicab). You must use actual expenses                                                      other  basis  of  business  or  investment 
                                               sions or fees that are capitalized or de-
if you used five or more vehicles simul-                                                      property having a useful life substantial-
                                               ducted elsewhere on your return.
taneously  in  your  business  (such  as  in                                                  ly beyond the tax year. You can also de-
fleet  operations).  You  can’t  use  actual      You must file Form 1099-NEC to re-          preciate  improvements  made  to  leased 
expenses for a leased vehicle if you pre-      port  certain  commissions  and  fees  of      business  property.  However,  stock  in 
viously  used  the  standard  mileage  rate    $600  or  more  during  the  year.  See  the   trade,  inventories,  and  land  are  not  de-
for that vehicle.                              Instructions  for  Forms  1099-MISC  and       preciable. Depreciation starts when you 
                                               1099-NEC for details.                          first use the property in your business or 
You  can  take  the  standard  mileage                                                        for  the  production  of  income.  It  ends 
rate for 2023 only if you:                     Sales  of  property. Generally,  commis-       when you take the property out of serv-
•    Owned  the  vehicle  and  used  the       sions and other fees paid to facilitate the    ice,  deduct  all  your  depreciable  cost  or 
standard  mileage  rate  for  the  first  year sale  of  property  must  be  capitalized.     other basis, or no longer use the property 
you placed the vehicle in service, or          However, if you are a dealer in property,      in your business or for the production of 
•    Leased  the  vehicle  and  are  using     enter  on  line  10  the  commissions  and     income. You can also elect under section 
the  standard  mileage  rate  for  the  entire fees you paid to facilitate the sale of that   179 to expense part or all of the cost of 
lease period.                                  property.                                      certain property you bought in 2023 for 
                                               Note.   A  dealer  in  property  is  a  person use  in  your  business.  See  the  Instruc-
If you take the standard mileage rate:         who regularly sells property in the ordi-      tions for Form 4562 and Pub. 946 to fig-
•    Multiply  the  number  of  business       nary course of their trade or business.        ure the amount to enter on line 13.
miles  driven  by  0.655.  For  example, 
                                                  For more information on the capitali-
1,250  business  miles  driven  ×  0.655  =                                                   When to attach Form 4562.  You must 
                                               zation of commissions and fees, see the 
$818.75.                                                                                      complete and attach Form 4562 only if 
                                               examples  under  Regulations  section 
•    Add  to  this  amount  your  parking                                                     you are claiming:
                                               1.263(a)-1(e).
fees and tolls; and                                                                           •    Depreciation on property placed in 
•    Enter  the  total  on  line  9.  Do  not                                                 service during 2023;
deduct  depreciation,  rent  or  lease  pay-   Line 11                                        •    Depreciation  on  listed  property 
ments,  or  your  actual  operating  expen-    Enter the total cost of contract labor for     (defined later), regardless of the date it 
ses.                                           the  tax  year.  Contract  labor  includes     was placed in service; or
                                               payments to persons you do not treat as        •    A section 179 expense deduction.
If you deduct actual expenses:                                                                If you acquired depreciable property 
                                               employees  (for  example,  independent 
•    Include on line 9 the business por-                                                      for the first time in 2023, see Pub. 946.
                                               contractors)  for  services  performed  for 
tion  of  expenses  for  gasoline,  oil,  re-
                                               your  trade  or  business.  Do  not  include 
pairs, insurance, license plates, etc.; and                                                   Listed property. Listed property gener-
                                               contract  labor  deducted  elsewhere  on 
•    Show depreciation on line 13 and                                                         ally includes but is not limited to:
                                               your  return,  such  as  contract  labor  in-
rent or lease payments on line 20a.                                                           •    Passenger  automobiles  weighing 
                                               cludible on line 17, 21, 26, or 37. Also,      6,000 pounds or less;
For details, see chapter 4 of Pub. 463.        do  not  include  salaries  and  wages  paid   •    Any other property used for trans-
Information  on  your  vehicle. If  you        to your employees; instead, see Line 26,       portation  if  the  nature  of  the  property 
claim  any  car  and  truck  expenses,  you    later.                                         lends itself to personal use, such as mo-
must provide certain information on the           You must file Form 1099-NEC to re-          torcycles, pickup trucks, etc.; and
use  of  your  vehicle  by  completing  one    port contract labor payments of $600 or        •    Any  property  used  for  entertain-
of the following.                              more  during  the  year.  See  the  Instruc-   ment  or  recreational  purposes  (such  as 
1. Complete Schedule C, Part IV, if            tions  for  Forms  1099-MISC  and              photographic,  phonographic,  communi-
(a) you are claiming the standard mile-        1099-NEC for details.                          cation, and video recording equipment).
age rate, you lease your vehicle, or your                                                     Exception.   Listed  property  does  not 
vehicle is fully depreciated; and (b) you      Line 12                                        include  photographic,  phonographic, 
are  not  required  to  file  Form  4562  for  Enter  your  deduction  for  depletion  on     communication,  or  video  equipment 
any other reason. If you used more than        this  line.  If  you  have  timber  depletion, used  exclusively  in  your  trade  or  busi-
one  vehicle  during  the  year,  attach  a    attach  Form  T  (Timber).  See  chapter  7    ness  or  at  your  regular  business  estab-
statement with the information requested       of Pub 225 for additional details.             lishment. For purposes of this exception, 
in  Schedule  C,  Part  IV,  for  each  addi-                                                 a  portion  of  your  home  is  treated  as  a 
tional vehicle.                                         Depletion  is  generally  an  item    regular  business  establishment  only  if 
                                                        of tax preference under the Al-
2. Complete  Form  4562,  Part  V,  if         CAUTION!                                       that portion meets the requirements un-
                                                        ternative Minimum Tax (AMT). 
you  are  claiming  depreciation  on  your                                                    der section 280A(c)(1) for deducting ex-
                                               See section 57.
vehicle or you are required to file Form 

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penses  for  the  business  use  of  your      ing  on  its  type.  For  example,  home                The Tax Cuts and Jobs Act, sec-
home.                                          mortgage  interest  and  investment  inter-     !       tion  11043,  limited  the  deduc-
                                               est are treated differently. “Interest allo-    CAUTION tion for mortgage interest paid 
Recapture.   See Line 6, earlier, if the 
                                               cation”  rules  require  you  to  allocate      on home equity loans and lines of credit. 
business  use  percentage  of  any  listed 
                                               (classify)  your  interest  expense  so  it  is See section 163(h)(3)(F).
property dropped to 50% or less in 2023.
                                               deducted (or capitalized) on the correct 
                                               line of your return and receives the right      If  you  and  at  least  one  other  person 
Line 14                                        tax  treatment.  These  rules  could  affect    (other than your spouse if you file a joint 
Deduct contributions to employee bene-         how  much  interest  you  are  allowed  to      return) were liable for and paid interest 
fit  programs  that  are  not  an  incidental  deduct on Schedule C.                           on the mortgage and the other person re-
                                                                                               ceived  the  Form  1098,  include  your 
part  of  a  pension  or  profit-sharing  plan Generally,  you  allocate  interest  ex-
                                                                                               share of the interest on line 16b. Attach 
included on line 19. Examples are acci-        pense by tracing how the proceeds of the 
                                                                                               a  statement  to  your  return  showing  the 
dent  and  health  plans,  group-term  life    loan  were  used.  See  chapter  4  of Pub. 
                                                                                               name and address of the person who re-
insurance, and dependent care assistance       225, generally, for details.
programs. If you made contributions on                                                         ceived  the  Form  1098.  In  the  margin 
                                               Limitation  on  business  interest.    You 
your behalf as a self-employed person to                                                       next to line 16b, enter “See attached.”
                                               must file Form 8990 to deduct any inter-
a  dependent  care  assistance  program,                                                       If you paid interest in 2023 that also 
                                               est expenses of this trade or business un-
complete Form 2441, Parts I and III, to                                                        applies to future years, deduct only the 
                                               less  you  are  a small  business  taxpayer 
figure  your  deductible  contributions  to                                                    part that applies to 2023.
                                               (defined under    Part III) or meet one of 
that program.
                                               the  other  filing  exceptions  listed  in  the 
You cannot deduct contributions you            Instructions for Form 8990.                     Line 17
made on your behalf as a self-employed         If  you  must  file  Form  8990,  figure        Include on this line fees charged by ac-
person for group-term life insurance.          the  limit  on  your  business  interest  ex-   countants and attorneys that are ordinary 
                                               penses on Form 8990 before completing           and  necessary  expenses  directly  related 
Do not include on line 14 any contri-                                                          to operating your business.
                                               lines  16a  and  16b.  Follow  the  instruc-
butions  you  made  on  your  behalf  as  a 
                                               tions under How to report, later, but re-
self-employed person to an accident and                                                        Include fees for tax advice related to 
                                               port  the  reduced  interest  on  lines  16a 
health plan. However, you may be able                                                          your business and for preparation of the 
                                               and  16b.  The  interest  you  can't  deduct 
to  deduct  on  Schedule  1  (Form  1040),                                                     tax forms related to your business. Also, 
                                               this year will carry forward to next year 
line 17, the amount you paid for health                                                        include  expenses  incurred  in  resolving 
                                               on Form 8990.
insurance  on  behalf  of  yourself,  your                                                     asserted tax deficiencies related to your 
spouse, and dependents, even if you do         If you are a small business taxpayer            business.
not itemize your deductions. See the in-       or  meet  one  of  the  other  filing  excep-
structions  for  line  17,  Schedule  1,  con- tions for Form 8990, follow the instruc-        For more information, see Pub. 334.
tained  within  the  Instructions  for  Form   tions under How to report, later, and re-
1040.                                          port  all  of  your  deductible  interest  on   Line 18
                                               lines 16a and 16b.                              Include on this line your expenses for
You must reduce your line 14 deduc-
                                               How to report.    If you have a mortgage        office supplies and postage.
tion  by  the  amount  of  any  credit  for 
                                               on  real  property  used  in  your  business, 
small employer health insurance premi-
                                               enter  on  line  16a  the  interest  you  paid 
ums  determined  on  Form  8941.  See                                                          Line 19
                                               for 2023 to banks or other financial in-
Form 8941 and its instructions to deter-                                                       Enter  your  deduction  for  the  contribu-
                                               stitutions for which you received a Form 
mine which expenses are eligible for the                                                       tions  you  made  for  the  benefit  of  your 
                                               1098  (or  similar  statement).  If  you  did 
credit.                                                                                        employees  to  a  pension,  profit-sharing, 
                                               not receive a Form 1098, enter the inter-
                                               est on line 16b.                                or  annuity  plan  (including  SEP,  SIM-
                                                                                               PLE,  and  SARSEP  plans  described  in 
Line 15                                        If  you  paid  more  mortgage  interest         Pub. 560). If the plan included you as a 
Deduct  premiums  paid  for  business  in-     than is shown on Form 1098, include the         self-employed  person,  enter  the  contri-
surance  on  line  15.  Deduct  on  line  14   amount on line 16a. Attach a statement          butions  made  as  an  employer  on  your 
amounts paid for employee accident and         to your return explaining the difference        behalf  on  Schedule  1  (Form  1040), 
health insurance. Do not deduct amounts        and  enter  “See  attached”  in  the  margin    line 16, not on Schedule C.
credited  to  a  reserve  for  self-insurance  next to line 16a. Don’t include mortgage 
or premiums paid for a policy that pays        interest that must be capitalized, for ex-      This deduction may be subject to lim-
for your lost earnings due to sickness or      ample, added to basis. See  Pub. 551, un-       itations. For more information on poten-
disability.  For  details,  see Pub.  334,     der  Uniform  Capitalization  Rules,  for       tial limitations, see Pub. 560.
chapter 8.                                     details.
                                                                                               In most cases, you must file the ap-
                                                                                               plicable form listed below if you main-
Lines 16a and 16b                                                                              tain  a  pension,  profit-sharing,  or  other 
Interest allocation rules. The tax treat-                                                      funded-deferred compensation plan. The 
ment of interest expense differs depend-                                                       filing  requirement  is  not  affected  by 

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whether or not the plan qualified under       You  can  also  deduct  the  cost  of            governments. These taxes are not inclu-
the  Internal  Revenue  Code,  or  whether    books,  professional  instruments,  equip-       ded  in  gross  receipts  or  sales  nor  are 
or not you claim a deduction for the cur-     ment,  etc.,  if  you  normally  use  them       they  a  deductible  expense.  However,  if 
rent tax year. There is a penalty for fail-   within a year. However, if their useful-         the  state  or  local  government  allowed 
ure to timely file these forms.               ness  extends  substantially  beyond  a          you  to  retain  any  part  of  the  sales  tax 
Form  5500-EZ.  File  this  form  if  you     year,  you  must  generally  recover  their      you  collected,  you  must  include  that 
have  a  one-participant  retirement  plan    costs through depreciation.                      amount as income on line 6.
that  meets  certain  requirements.  A                                                         • Other taxes and license fees not re-
one-participant plan is a plan that covers    Line 23                                          lated to your business.
only you (or you and your spouse).            You can deduct the following taxes and                     Do  not  reduce  your  deduction 
Form 5500-SF.   File this form electroni-     licenses on this line.                           !         for  social  security  and  Medi-
cally  with  the  Department  of  Labor  (at  • State and local sales taxes imposed            CAUTION   care taxes by the nonrefundable 
efast.dol.gov)  if  you  have  a  small  plan on you as the seller of goods or services.       and refundable portions of the credit for 
(fewer than 100 participants in most ca-      If you collected this tax from the buyer,        sick  and  family  leave  wages  that  you 
ses) that meets certain requirements.         you  must  also  include  the  amount  col-      claimed  on  Form  944  or  Form(s)  941. 
Form 5500.   File this form electronical-     lected  in  gross  receipts  or  sales  on       Instead, you must report your credit for 
ly  with  the  Department  of  Labor  (at     line 1.                                          qualified sick and family leave wages as 
efast.dol.gov)  for  a  plan  that  does  not • Real  estate  and  personal  property          income on line 6.
meet  the  requirements  for  filing  Form    taxes on business assets.
5500-EZ or Form 5500-SF.                      • Licenses  and  regulatory  fees  for 
                                              your trade or business paid each year to         Line 24a
For details, see Pub. 560.                    state or local governments. But some li-
                                                                                               Enter  your  expenses  for  lodging  and 
                                              censes,  such  as  liquor  licenses,  may 
                                                                                               transportation connected with overnight 
Lines 20a and 20b                             have  to  be  amortized.  See  the  Instruc-
                                                                                               travel  for  business  while  away  from 
                                              tions  for  Form  4562,  Depreciation  and 
If you rented or leased vehicles, machi-                                                       your tax home. In most cases, your tax 
                                              Amortization,  for  more  information  on 
nery, or equipment, enter on line 20a the                                                      home is your main place of business, re-
                                              amortization.
business portion of your rental cost. But                                                      gardless  of  where  you  maintain  your 
if you leased a vehicle for a term of 30      • Social security and Medicare taxes 
                                                                                               family home. You can’t deduct expenses 
                                              paid to match required withholding from 
days  or  more,  you  may  have  to  reduce                                                    paid or incurred in connection with em-
                                              your  employees’  wages.  Reduce  your 
your deduction by the inclusion amount.                                                        ployment away from home if that period 
                                              deduction  by  the  amount  shown  on 
See Leasing a Car in chapter 4 of Pub.                                                         of  employment  exceeds  1  year.  Also, 
                                              Form 8846, line 4.
463 to figure this amount.                                                                     you  cannot  deduct  travel  expenses  for 
                                              • Federal unemployment tax paid.
                                                                                               your spouse, your dependent, or any oth-
Enter  on  line  20b  amounts  paid  to       • Federal highway use tax.
                                                                                               er  individual  unless  that  person  is  your 
rent or lease other property, such as of-     • Contributions to a state unemploy-
                                                                                               employee,  the  travel  is  for  a  bona  fide 
fice space in a building.                     ment insurance fund or disability benefit 
                                                                                               business  purpose,  and  the  expenses 
                                              fund if they are considered taxes under 
                                                                                               would  otherwise  be  deductible  by  that 
                                              state law.
Line 21                                                                                        person.
Deduct the cost of incidental repairs and     Do not deduct the following.                     Do not include expenses for meals on 
maintenance that do not add to the prop-      • Federal  income  taxes,  including             this line. Instead, see Line 24b, later. Do 
erty's  value  or  appreciably  prolong  its  your  self-employment  tax.  However,            not  include  entertainment  expenses  on 
life.  Do  not  deduct  the  value  of  your  you can deduct one-half of your self-em-         this line.
own labor. Do not deduct amounts spent        ployment  tax  on  Schedule  1  (Form 
to restore or replace property; they must     1040),  line  15  (but  if  filing  Form         Instead  of  keeping  records  of  your 
be capitalized.                               1040-NR, then only when covered under            actual incidental expenses, you can use 
                                              the U.S. social security system due to an        an  optional  method  for  deducting  inci-
                                              international social security agreement).        dental expenses only if you did not pay 
Line 22                                         Estate and gift taxes.                         or  incur  meal  expenses  on  a  day  you 
                                              •
In most cases, you can deduct the cost of     • Taxes assessed to pay for improve-             were  traveling  away  from  your  tax 
materials and supplies only to the extent     ments, such as paving and sewers.                home.  The  amount  of  the  deduction  is 
you actually consumed and used them in        • Taxes  on  your  home  or  personal            $5  a  day.  Incidental  expenses  include 
your business during the tax year (unless     use property.                                    fees  and  tips  given  to  porters,  baggage 
you deducted them in a prior tax year).       • State and local sales taxes on prop-           carriers, bellhops, hotel maids, stewards 
However, if you had incidental materials      erty purchased for use in your business.         or stewardesses and others on ships, and 
and supplies on hand for which you kept       Instead,  treat  these  taxes  as  part  of  the hotel servants in foreign countries. They 
no inventories or records of use, you can     cost of the property.                            do  not  include  expenses  for  laundry, 
deduct  the  cost  of  those  you  actually   • State and local sales taxes imposed            cleaning and pressing of clothing, lodg-
purchased during the tax year, provided       on  the  buyer  that  you  were  required  to    ing  taxes,  or  the  costs  of  telegrams  or 
that method clearly reflects income.          collect  and  pay  over  to  state  or  local    telephone  calls.  You  cannot  use  this 

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method  on  any  day  that  you  use  the       See Notice 2021-25 for examples and             incidentals  provided  to  a  nonemployee 
standard  meal  allowance  (as  explained       more  information.  Notice  2021-25  is         to the extent the expenses are includible 
under Line 24b, later).                         available    at           IRS.gov/irb/          in  the  gross  income  of  that  person  and 
                                                2021-17_IRB#NOT-2021-25.                        reported on Form 1099-NEC. See chap-
You can’t deduct expenses for attend-                                                           ter 5 of Pub. 15 (Circular E), Employer’s 
                                                Standard  meal  allowance.    Instead  of 
ing  a  convention,  seminar,  or  similar                                                      Tax Guide, for details and other excep-
                                                deducting the actual cost of your meals 
meeting  held  outside  the  North  Ameri-                                                      tions. See also chapter 8 of Pub. 334.
                                                while  traveling  away  from  home,  you 
can  area  unless  the  meeting  is  directly 
                                                can use the standard meal allowance for         Daycare providers.       If you qualify as a 
related to your trade or business and it is 
                                                your  daily  meals  and  incidental  expen-     family daycare provider, you can use the 
as reasonable for the meeting to be held 
                                                ses.  Under  this  method,  you  deduct  a      standard meal and snack rates, instead of 
outside  the  North  American  area  as 
                                                specified  amount,  depending  on  where        actual costs, to figure the deductible cost 
within it. These rules apply to both em-
                                                you travel, instead of keeping records of       of meals and snacks provided to eligible 
ployers and employees. Other rules ap-
                                                your  actual  meal  expenses.  However,         children.  If  you  receive  reimbursement 
ply to luxury water travel.
                                                you must still keep records to prove the        under a food program of the Department 
For  details  on  travel  expenses,  see        time,  place,  and  business  purpose  of       of  Agriculture,  only  deduct  the  cost  of 
chapter 1 of Pub. 463.                          your travel.                                    food that exceeds reimbursement, if any. 
                                                The  standard  meal  allowance  is  the         See  Pub.  587  for  details,  including  re-
                                                federal  meals  and  incidental  expenses       cordkeeping requirements.
Line 24b
                                                (M&IE)  rate.  You  can  find  these  rates 
Enter your deductible business meal ex-         for locations inside and outside the con-       Line 25
penses. This includes expenses for meals        tinental  United  States  by  going  to  the    Deduct  utility  expenses  only  for  your 
while  traveling  away  from  home  for         General  Services  Administration's  web-       trade or business.
business. Your deductible business meal         site  at  GSA.gov/travel/plan-book/per-
                                                                                                Local  telephone  service.   If  you  used 
expenses are a percentage of your actual        diem-rates/mie-breakdown.
business meal expenses or standard meal                                                         your  home  phone  for  business,  do  not 
allowance.  See   Amount  of  deduction,        See chapter 2 of Pub. 463 for details           deduct the base rate (including taxes) of 
later,  for  the  percentage  that  applies  to on  how  to  figure  your  deduction  using     the first phone line into your residence. 
your  actual  meal  expenses  or  standard      the  standard  meal  allowance,  including      But you can deduct any additional costs 
meal allowance. In most cases, the per-         special  rules  for  partial  days  of  travel. you incurred for business that are more 
centage is 50%.                                 For  special  per  diem  rates  and  rules  of  than the base rate of the first phone line. 
                                                high  cost  locales,  see IRS.gov/irb/          For  example,  if  you  had  a  second  line, 
Do not include entertainment expen-             2021-38_IRB#NOT-2021-52.                        you can deduct the business percentage 
ses on this line.                               Amount  of  deduction.    For  business         of the charges for that line, including the 
Business meal expenses.       You can de-       meals, you can deduct 50% of your busi-         base rate charges.
duct a percentage of the actual cost of a       ness meal expenses, including meals in-
meal if the following conditions are met.       curred while away from home on busi-
                                                                                                Line 26
•     The meal expense was an ordinary          ness. However, for individuals subject to 
and  necessary  expense  in  carrying  on       the Department of Transportation (DOT)          Enter the total salaries and wages for the 
your trade or business.                         hours  of  service  limits,  the  percentage    tax  year  reduced  by  the  amount  of  the 
•     The expense was not lavish or ex-         for other business meals is increased to        following credit(s), if applicable.
travagant under the circumstances.              80% for business meals consumed dur-            • Work  Opportunity  Credit  (Form 
•     You or your employee was present          ing, or incident to, any period of duty for     5884).
at the meal.                                    which those limits are in effect. Individ-      • Empowerment  Zone  Employment 
•     The  meal  was  provided  to  a  cur-     uals subject to the DOT hours of service        Credit (Form 8844).
rent or potential business customer, cli-       limits include the following.                   • Credit  for  Employer  Differential 
ent, consultant, or similar business con-       • Certain  air  transportation  workers         Wage Payments (Form 8932).
tact.                                           (such  as  pilots,  crew,  dispatchers,  me-    • Employer  Credit  for  Paid  Family 
•     In  the  case  of  food  or  beverages    chanics,  and  control  tower  operators)       and Medical Leave (Form 8994).
provided  during  or  at  an  entertainment     who are under Federal Aviation Admin-           Do not reduce your deduction for any 
event, the food and beverages were pur-         istration regulations.                          portion  of  a  credit  that  was  passed 
chased  separately  from  the  entertain-       • Interstate  truck  operators  who  are        through to you from a pass-through enti-
ment, or the cost of the food and bever-        under DOT regulations.                          ty.  See  the  instructions  for  the  credit 
ages was stated separately from the cost        • Certain merchant mariners who are             form for more information.
of  the  entertainment  on  one  or  more       under Coast Guard regulations.
                                                                                                Do not include salaries and wages de-
bills, invoices, or receipts.                   However, you can fully deduct meals             ducted  elsewhere  on  your  return  or 
        You cannot avoid the entertain-         and incidentals furnished or reimbursed         amounts paid to yourself.
                                                to an employee if you properly treat the 
!       ment  disallowance  rule  by  in-       expense  as  wages  subject  to  withhold-
CAUTION flating the amount charged for 
food and beverages.                             ing. You can also fully deduct meals and 

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        If  you  provided  taxable  fringe     ularly for daycare, or regularly for stor-      tion  for  any  additional  home.  If  one  or 
!       benefits  to  your  employees,         age of inventory or product samples, by         more of the homes were not used for the 
CAUTION such  as  personal  use  of  a  car,   $5. The area you use to figure your de-         entire  year  (for  example,  you  moved 
do not deduct as wages the amount ap-          duction  cannot  exceed  300  square  feet.     during  the  year),  see  Part-year  use  or 
plicable  to  depreciation  and  other  ex-    You cannot use the simplified method to         area changes (for simplified method on-
penses claimed elsewhere.                      figure a deduction for rental use of your       ly), later, and Columns (a) and (b) in the 
                                               home.                                           Instructions for Form 8829.
In most cases, you are required to file        Electing to use the simplified meth-               Other  requirements  must  still  be 
Form  W-2  for  each  employee.  See  the      od. You  choose  whether  or  not  to  use      met. You must still meet all the use re-
General Instructions for Forms W-2 and         the  simplified  method  each  tax  year.       quirements  to  claim  a  deduction  for 
W-3.                                           Make  the  election  by  using  the  simpli-    business use of the home. The simplified 
                                               fied method to figure the deduction for         method is only an alternative to the cal-
Line 27b                                       the qualified business use of a home on         culation,  allocation,  and  substantiation 
                                               a  timely  filed,  original  federal  income    of actual expenses. The simplified meth-
Energy efficient commercial buildings 
                                               tax return for that year. An election for a     od is not an alternative to the exclusivity 
deduction.  You may be able to deduct 
                                               year,  once  made,  is  irrevocable.  A         and other tests that must be met in order 
part or all of the expenses of modifying 
                                               change from using the simplified meth-          to  qualify  for  this  deduction.  For  more 
an existing commercial building to make 
                                               od  in  one  year  to  actual  expenses  in  a  information  about  qualifying  business 
it energy efficient. For details, see Form 
                                               succeeding year, or vice versa, is not a        uses, see Qualifying for a Deduction in 
7205  and  its  instructions.  Attach  Form 
                                               change  in  method  of  accounting  and         Pub. 587.
7205 to your tax return.
                                               does not require the consent of the Com-
                                                                                                  Gross   income         limitation. The 
                                               missioner.
                                                                                               amount of your deduction is still limited 
Line 30                                        If you share your home with someone             to the gross income derived from quali-
Business  use  of  your  home. You  may        else  who  uses  the  home  for  a  separate    fied  business  use  of  the  home  reduced 
be  able  to  deduct  certain  expenses  for   business that qualifies for this deduction,     by  the  business  deductions  that  are  not 
business  use  of  your  home,  subject  to    each  of  you  may  make  your  own  elec-      related to your use of the home. If this 
limitations.  To  claim  a  deduction  for     tion, but not for the same portion of the       limitation  reduces  the  amount  of  your 
business  use  of  your  home,  use  Form      home.                                           deduction, you cannot carry over the dif-
8829, or you can elect to determine the        If  you  conduct  more  than  one  busi-        ference to another tax year.
amount of the deduction using a simpli-        ness  that  qualifies  for  this  deduction  in 
                                                                                                  Carryover  of  actual  expenses  from 
fied method.                                   your home, your election to use the sim-
                                                                                               Form 8829. If you used Form 8829 in a 
If you have a business use of another          plified method applies to all your quali-
                                                                                               prior year, and you had actual expenses 
home, you can’t use the simplified meth-       fied business uses of your home. You are 
                                                                                               that  you  could  carry  over  to  the  next 
od for that home. You can use the Form         limited to a maximum of 300 square feet 
                                                                                               year, you cannot claim those expenses if 
8829 to claim expenses for business use        for all of the businesses you conduct in 
                                                                                               you are using the simplified method. In-
of the other home.                             your  home  that  qualify  for  this  deduc-
                                                                                               stead,  the  actual  expenses  from  Form 
For  additional  information  about            tion. Allocate the actual square footage 
                                                                                               8829 that were not allowed will be car-
claiming this deduction, see Pub. 587.         used  (up  to  the  maximum  300  square 
                                                                                               ried  over  to  the  next  year  that  you  use 
                                               feet) among your qualified business uses 
                                                                                               actual  expenses  to  figure  your  deduc-
Note. Line 30 doesn't apply to filers of       in  any  reasonable  manner  you  choose, 
                                                                                               tion.
Form 1040-SS.                                  but  you  may  not  allocate  more  square 
        If you are not using the simpli-       feet to a qualified business use than you          Depreciation  of  home.  You  cannot 
                                               actually use in that business.
TIP     fied  method  to  determine  the                                                       deduct  any  depreciation  (including  any 
        amount  of  expenses  you  may                 If you used your home for more          additional first-year depreciation) or sec-
                                                                                               tion 179 expense for the portion of your 
deduct  for  business  use  of  a  home,  do   !       than  one  business,  you  will         home that is used in a qualified business 
not complete the additional entry spaces       CAUTION need  to  file  a  separate  Sched-
on  line  30  for  total  square  footage  of  ule C for each business. Do not combine         use  if  you  figure  the  deduction  for  the 
your home and of the part of the home          your  deductions  for  each  business  use      business  use  of  your  home  using  the 
used  for  business.  Instead,  include  the   on a single Schedule C.                         simplified method. The depreciation de-
amount from line 36 of your Form 8829                                                          duction allowable for that portion of the 
on line 30.                                    Business  use  of  more  than  one              home for that year is deemed to be zero.
                                               home. You  may  have  used  more  than 
Simplified  method.     The  simplified        one home in your business. If you used 
method  is  an  alternative  to  the  calcula- more than one home for the same busi-
tion, allocation, and substantiation of ac-    ness during 2023, you may elect to use 
tual  expenses.  In  most  cases,  you  will   the  simplified  method  for  only  one 
figure your deduction by multiplying the       home;  you  must  file  a  Form  8829  to 
area (measured in square feet) used reg-       claim a business use of the home deduc-
ularly and exclusively for business, reg-

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Simplified Method Worksheet                                                                                           Keep for Your Records
1. Enter the amount of the gross income limitation. See the Instructions for the Simplified Method Worksheet (below) . . . . . . .                                    1.   

2. Allowable square footage for the qualified business use. Do not enter more than 300 square feet. See the Instructions for the                                           
                                                                                                                                                                      2.
   Simplified Method Worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Simplified method amount
   a.   Maximum allowable amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        3a.                     $5
   b.   For daycare facilities not used exclusively for business, see the instructions for line 3b of this worksheet and enter the 
        decimal amount from the Daycare Facility Worksheet; otherwise, enter 1.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      3b.  
   c.   Multiply line 3a by line 3b and enter the result to 2 decimal places . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              3c.  

4. Multiply line 2 by line 3c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.   

5. Allowable expenses using the simplified method. Enter the smaller of line 1 or line 4 here and include that amount on 
   Schedule C, line 30. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      5.   

6. Carryover of unallowed expenses from a prior year that are not allowed in 2023.
   a.   Operating expenses. Enter the amount from your last Form 8829, line 43 (line 42 if before 2018). See the Instructions for 
        the Simplified Method Worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       6a.  
   b.   Excess casualty losses and depreciation. Enter the amount from your last Form 8829, line 44 (line 43 if before 2018). See 
        the Instructions for the Simplified Method Worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              6b.  

                                                   Instructions for the Simplified Method Worksheet

Use this worksheet to figure the amount of expenses you may deduct for a qualified business use of a home if you are electing to use the simplified method for 
that home. If you are not electing to use the simplified method, use Form 8829.

Line 1. If all gross income from your trade or business is from this qualified business use of your home, figure your gross income limitation as follows.

   A.   Enter the amount from Schedule C, line 29  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                
   B.   Enter any gain derived from the business use of your home and shown on Form 8949 (and included on Schedule D) or Form 
        4797 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
   C.   Add lines A and B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       
   D.  Enter the total amount of any losses (as a positive number) shown on Form 8949 (and included on Schedule D) or Form 4797 that are 
        allocable to the business, but not allocable to the business use of the home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        
   E.   Gross income limitation. Subtract line D from line C. Enter the result here and on line 1 of the simplified method worksheet . . . . . . .                                            

If some of the income is from a place of business other than your home, you must first determine the part of your gross income (Schedule C, line 7, and gains 
from Form 8949, Schedule D, and Form 4797) from the business use of your home. In making this determination, consider the amount of time you spent at each 
location as well as other facts. After determining the part of your gross income from the business use of your home, subtract from that amount the total expenses 
shown on Schedule C, line 28, plus any losses shown on Form 8949 (and included on Schedule D) or Form 4797 that are allocable to the business in which you 
use your home but that are not allocable to the business use of the home. Enter the result on line 1 of the simplified method worksheet.

Note: If you had more than one home in which you conducted this business during the year, include only the income earned and the deductions attributable to 
that income during the period you owned the home for which you elected to use the simplified method.

Line 2. If you used the same area for the entire year, enter the smaller of the square feet you actually used or 300. If you and your spouse conducted the business 
as a qualified joint venture, split the square feet between you and your spouse in the same manner you split your other tax attributes. If you shared space with 
someone else, used the home for business for only part of the year, or the area you used changed during the year, see Figuring your allowable expenses for 
business use of the home, before entering an amount on this line. Do not enter more than 300 square feet or, if applicable, the average monthly allowable square 
footage on this line. See Part-year use or area changes (for simplified method only), later, for more information on how to figure your average monthly 
allowable square footage. 

Line 3b. If your qualified business use is providing daycare, you may need to account for the time that you used the same part of your home for other purposes. 
If you used the part of your home exclusively and regularly for providing daycare, enter 1.0 on line 3b. If you did not use the part of your home exclusively for 
providing daycare, complete the Daycare Facility Worksheet to figure what number to enter on line 3b. 

Line 6. Because you are using the simplified method this year, you cannot deduct the amounts you entered on lines 6a and 6b this year. If you file Form 8829 in 
a later year for your qualified business use of this home, you will be able to include these expenses when you figure your deduction. 

   6a.  If you did not file a 2022 Form 8829, then your carryover of prior year operating expenses is the amount of operating expenses shown 
        in Part IV of the last Form 8829, if any, that you filed to claim a deduction for business use of the home.

   6b.  If you did not file a 2022 Form 8829, then your carryover of prior year excess casualty losses and depreciation is the amount of excess 
        casualty losses and depreciation shown in Part IV of the last Form 8829, if any, that you filed to claim a deduction for business use of 
        the home.
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Daycare Facility Worksheet (for simplified method)                                                                                                          Keep for Your Records
1. Multiply days used for daycare during the year by hours used per day             . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1.  
2. Total hours available for use during the year. See the Instructions for the Daycare Facility Worksheet                   . . . . . . . . . . . . . . .   2.  
3. Divide line 1 by line 2. Enter the result as a decimal amount here and on line 3b of the Simplified Method 
Worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.  

                                                                    Instructions for the Daycare Facility Worksheet
Use this worksheet to figure the percentage to use on line 3b of the Simplified Method Worksheet. If you do not use the area of your home exclusively for daycare, you 
must reduce the prescribed rate before figuring your deduction using the simplified method.

TIP     If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to complete this worksheet. This worksheet is 
        only needed if you did not use the allowable area exclusively for daycare.

Line 1. Enter the total number of hours the facility was used for daycare during the year.
Example. Your home is used Monday through Friday for 12 hours per day for 250 days during the year. It is also used on 50 Saturdays for 8 hours a day. Enter 3,400 hours 
on line 4 (3,000 hours for weekdays plus 400 hours for Saturdays).
Line 2. If you used your home for daycare during the entire year, multiply 365 days (366 for a leap year) by 24 hours, and enter the result. 
If you started or stopped using your home for daycare during the year, you must prorate the number of hours based on the number of days the home was available for 
daycare. Multiply 24 hours by the number of days available and enter that result.

        Although  you  cannot  deduct                                 Shared  use  (for  simplified  method                                   ble square footage. You figure the aver-
TIP     any depreciation or section 179                         only).        If  you  share  your  home  with                                age  monthly  allowable  square  footage 
        expense for the portion of your                         someone else who uses the home for a                                          by  adding  the  amount  of  allowable 
home that is a qualified business use be-                       separate  business  that  also  qualifies  for                                square feet you used in each month and 
cause  you  elect  to  use  the  simplified                     this deduction, you may not include the                                       dividing the sum by 12.
method, you may still claim depreciation                        same  square  feet  to  figure  your  deduc-                                        When  determining  the  average 
or the section 179 expense deduction on                         tion as the other person. You must allo-                                      monthly  allowable  square  footage,  you 
other assets (for example, furniture and                        cate  the  shared  space  between  you  and                                   cannot  take  more  than  300  square  feet 
equipment)  used  in  the  qualified  busi-                     the other person in a reasonable manner.                                      into  account  for  any  one  month.  Addi-
ness use of your home.                                                                                                                        tionally,  if  your  qualified  business  use 
                                                                      Example.          Taylor  and  Logan  are 
Figuring  your  allowable  expenses  for                        roommates. Taylor uses 300 square feet                                        was less than 15 days in a month, use -0- 
business use of the home.           You will fig-               of  their  home  for  a  qualified  business                                  for that month.
ure  the  deduction  using  Form  8829  or                      use. Logan uses 200 square feet of their                                            Example 1.  Finley files a federal in-
the  Simplified  Method  Worksheet,  or                         home  for  a  separate  qualified  business                                   come tax return on a calendar year basis. 
both.                                                           use.  The  qualified  business  uses  share                                   On  July  20,  Finley  began  using  400 
                                                                100 square feet. In addition to the por-                                      square  feet  of  the  home  for  a  qualified 
        You may not use the simplified                          tion  that  they  do  not  share,  Taylor  and                                business use. Finley continued to use the 
!       method  and  also  file  Form                           Logan  can  both  claim  50  of  the  100                                     400 square feet until the end of the year. 
CAUTION 8829  for  the  same  qualified 
                                                                square feet or divide the 100 square feet                                     Finley's  average  monthly  allowable 
business use of the same home.                                  between them in any reasonable manner.                                        square  footage  is  125  square  feet  (300 
                                                                If  divided  evenly,  Taylor  could  claim 
Using  Form  8829.          Use  Form  8829                                                                                                   square feet for August through Decem-
                                                                250  square  feet  using  the  simplified 
to figure and claim this deduction for a                                                                                                      ber divided by the number of months in 
                                                                method  and  Logan  could  claim  150 
home  if  you  are  not  or  cannot  use  the                                                                                                 the  year  ((300  +  300  +  300  +  300  + 
                                                                square feet.
simplified method for that home. For in-                                                                                                      300)/12)).
formation about claiming this deduction                               Part-year  use  or  area  changes  (for                                       Example  2. Riley  files  a  federal  in-
using  Form  8829,  see  the  Instructions                      simplified method only).                      If your quali-                  come tax return on a calendar year basis. 
for Form 8829 and Pub. 587.                                     fied business use was for a portion of the                                    On  April  20,  Riley  began  using  100 
                                                                tax  year  (for  example,  a  seasonal  busi-
Using  the  simplified  method.                   Use                                                                                         square  feet  of  the  home  for  a  qualified 
                                                                ness,  a  business  that  begins  during  the 
the Simplified  Method  Worksheet  in                                                                                                         business use. On August 5, Riley expan-
                                                                year, or you moved during the year) or 
these instructions to figure your deduc-                                                                                                      ded the area of qualified business use to 
                                                                you changed the square footage of your 
tion for a qualified business use of your                                                                                                     350 square feet. Riley continued to use 
                                                                qualified business use, your deduction is 
home if you are electing to use the sim-                                                                                                      the 350 square feet until the end of the 
                                                                limited  to  the  average  monthly  allowa-
plified method for that home.                                                                                                                 year. Riley's average monthly allowable 

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square  footage  is  150  square  feet  (100  not  use  your  home  for  business.  You     If you checked the "No" box on line 
square  feet  for  May  through  July  and    cannot  deduct  any  excess  mortgage  in-    G,  see  the  Instructions  for  Form  8582; 
300 square feet for August through De-        terest, excess real estate taxes, or excess   you  may  need  to  include  information 
cember  divided  by  the  number  of          casualty  losses  on  Schedule  C  for  this  from this schedule on Form 8582, even 
months in the year ((100 + 100 +100 +         home.                                         if you have a net profit.
300 + 300 + 300 + 300 + 300)/12)).            Use Part II of Schedule C to deduct           Rental  real  estate  activity.   Unless 
Example 3. Carter files a federal in-         business  expenses  that  are  unrelated  to  you  are  a  qualifying  real  estate  profes-
come tax return on a calendar year basis.     the  qualified  business  use  of  the  home  sional,  a  rental  real  estate  activity  is  a 
From January 1 through July 16, Carter        (for  example,  expenses  for  advertising,   passive  activity,  even  if  you  materially 
used 300 square feet of the home for a        wages,  or  supplies,  or  depreciation  of   participated in the activity. If you have a 
qualified business use. On July 17, Car-      equipment or furniture).                      loss, you may need to file Form 8582 to 
ter moved to a new home and immedi-           Deduction  figured  on  multiple              apply a limitation that may reduce your 
ately began using 200 square feet of the      forms. If you used more than one home         loss. See the Instructions for Form 8582.
new  home  for  the  same  qualified  busi-   for  a  business  during  the  year,  use  a  Reporting  your  net  profit  or  loss. 
ness use. Using the simplified method to      Form  8829  for  each  home  or  use  the     Once you have figured your net profit or 
deduct  expenses  for  the  qualified  busi-  simplified  method  for  one  home  and       loss, report it as follows.
ness use for the previous home, Carter’s      Form  8829  for  any  other  home.  Com-
                                                                                                    If  you  enter  a  loss  on  line  31, 
average monthly allowable square foot-        bine  the  amount  you  figured  using  the 
                                                                                                    you  may  have  an  excess  busi-
age is 175 square feet (300 square feet       simplified method and the amounts you         CAUTION!
                                                                                                    ness loss. Use Form 461 to fig-
for January through July divided by the       figured  on  your  Forms  8829,  and  then 
                                                                                            ure your excess business loss.
number  of  months  in  the  year  ((300  +   enter the total on line 30 of the Sched-
300 + 300 + 300 + 300 + 300 + 300)/           ule C for that business.                      Individuals.   Enter your net profit or 
12)). Carter also prepared Form 8829 to 
deduct  the  actual  expenses  associated                                                   loss on line 31 and include it on Sched-
with  the  qualified  business  use  of  the  Line 31                                       ule 1 (Form 1040), line 3. Also, include 
new home.                                     Figuring  your  net  profit  or  loss. If     your net profit or loss on Schedule SE, 
Once  you  have  determined  your  al-        your  expenses  (including  the  expenses     line  2.  However,  if  you  are  a  statutory 
lowable square footage, enter the result      you  report  on  line  30)  are  more  than   employee or notary public, see Statutory 
on  line  2  of  the  Simplified  Method      your gross income, don’t enter your loss      employees or Notary public, later.
Worksheet.                                    on  line  31  until  you  have  applied  the  Nonresident  aliens.         Enter  your  net 
                                              at-risk rules and the passive activity loss 
        If  you  moved  during  the  year,                                                  profit or loss on line 31 and include it on 
                                              rules. To apply these rules, follow the in-   Schedule  1  (Form  1040),  line  3.  You 
!       your average allowable square         structions  under Line  32,  later,  and  the should  also  include  this  amount  on 
CAUTION footage  will  generally  be  less 
                                              Instructions for Form 8582. After apply-
than 300.                                                                                   Schedule SE, line 2, if you are covered 
                                              ing  those  rules,  the  amount  on  line  31 under  the  U.S.  social  security  system 
        You  can  use  the  Area  Adjust-     will be your loss, and it may be smaller      due  to  an  international  social  security 
TIP     ment Worksheet in Pub. 587 to         than the amount you figured by subtract-      agreement currently in effect. See the In-
        help you determine the allowa-        ing line 30 from line 29.                     structions for Schedule SE for informa-
ble square footage to enter on line 2 of      If  your  gross  income  is  more  than       tion  on  international  social  security 
the Simplified Method Worksheet.              your  expenses  (including  the  expenses     agreements. However, if you are a statu-
                                              you  report  on  line  30),  and  you  don’t  tory employee or notary public, see Stat-
Reporting your expenses for business          have prior year unallowed passive activ-      utory employees or Notary public, later.
use of the home.  If you did not use the      ity losses, subtract line 30 from line 29. 
                                                                                            Trusts  and  estates.        Enter  the  net 
simplified  method,  include  the  amount     The result is your net profit.
from line 36 of Form 8829 on line 30 of                                                     profit or loss on line 31 and include it on 
                                              If  your  gross  income  is  more  than 
the  Schedule  C  you  are  filing  for  that                                               Form 1041, line 3.
                                              your  expenses  (including  the  expenses 
business.                                                                                   Statutory  employees.        Enter  your  net 
                                              you report on line 30), and you have pri-
If you used the simplified method.      If    or  year  unallowed  passive  activity  los-  profit or loss on line 31 and include it on 
you  elect  to  use  the  simplified  method  ses, don’t enter your net profit on line 31   Schedule 1 (Form 1040), line 3. Howev-
for the business use of a home, complete      until you have figured the amount of pri-     er, do not report this amount on Sched-
the additional entry spaces on line 30 for    or year unallowed passive activity losses     ule  SE,  line  2.  If  you  were  a  statutory 
that home only. Include the amount from       you may claim this year for this activity.    employee  and  you  are  required  to  file 
line  5  of  the  Simplified  Method  Work-   Use Form 8582 to figure the amount of         Schedule  SE  because  of  other  self-em-
sheet on line 30.                             prior  year  unallowed  passive  activity     ployment  income,  see  the  Instructions 
If  you  itemize  your  deductions  on        losses  you  may  include  on  line  31.  Be  for Schedule SE.
Schedule A, you may deduct your mort-         sure  to  indicate  that  you  are  including Notary public.    Do not enter your net 
gage interest, real estate taxes, and casu-   prior year passive activity losses by en-     profit  from  line  31  on  Schedule  SE, 
alty losses on Schedule A as if you did       tering  "PAL"  to  the  left  of  the  entry  line  2,  unless  you  are  required  to  file 
                                              space.

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Schedule  SE  because  you  have  other        • Cash,  property,  or  borrowed                on line 31. See the Instructions for Form 
self-employment  income.  See  the  In-        amounts  used  in  the  business  (or  con-     8582 for details.
structions for Schedule SE.                    tributed  to  the  business,  or  used  to  ac-
                                                                                                       If you checked box 32b because 
                                               quire  the  business)  that  are  protected 
        You can deduct one-half of your                                                        !       some  investment  is  not  at  risk 
                                               against  loss  by  a  guarantee,  stop-loss 
TIP     self-employment  tax  on  Sched-                                                       CAUTION and  you  do  not  attach  Form 
                                               agreement, or other similar arrangement 
        ule 1 (Form 1040), line 15. See                                                        6198, the processing of your return may 
                                               (excluding casualty insurance and insur-
the Instructions for Schedule SE for de-                                                       be delayed.
                                               ance against tort liability).
tails.
                                               • Amounts  borrowed  for  use  in  the          At-risk loss deduction.   Any loss from 
Community  income.   If  you  and  your        business from a person who has an inter-        this business not allowed for 2023 only 
spouse  had  community  income  and  are       est in the business, other than as a cred-      because of the at-risk rules is treated as a 
filing  separate  returns,  see  the  Instruc- itor,  or  who  is  related  under  section     deduction  allocable  to  the  business  in 
tions  for  Schedule  SE  before  figuring     465(b)(3)(C)  to  a  person  (other  than       2024.
self-employment tax.                           you) having such an interest.                   More information.         For details, see the 
Earned  income  credit  (EIC).    If  you      Figuring your loss.   Before determining        Instructions  for  Form  6198  and  Pub. 
have a net profit on line 31, this amount      your loss, check box 32a or 32b to indi-        925.
is  earned  income  and  may  qualify  you     cate whether the loss from your business 
for the EIC.                                   activity  is  limited  by  the  at-risk  rules. 
                                               Follow the instructions, next, that apply 
        To figure your EIC, use the in-                                                        Part III. Cost of 
                                               to your box 32 activity.
!       structions  for  Form  1040,                                                           Goods Sold
CAUTION line  27.  Complete  all  applica-
                                               Note.  Line 32 doesn't apply to filers of 
ble steps plus Worksheet B. If you are re-     Form 1040-SS.                                   In most cases, if you engaged in a trade 
quired to file Schedule SE, remember to                                                        or business in which the production, pur-
enter  one-half  of  your  self-employment     All  investment  is  at  risk.     If  all 
                                                                                               chase, or sale of merchandise was an in-
tax in Part 1, line 1d, of Worksheet B.        amounts  are  at  risk  in  this  business, 
                                                                                               come-producing  factor,  you  must  take 
                                               check  box  32a.  If  you  answered  “Yes” 
                                                                                               inventories into account at the beginning 
                                               on line G, your loss will not be reduced 
                                                                                               and end of your tax year.
Line 32                                        by the at-risk rules or the passive activi-
                                               ty  loss  rules.  See Line  31,  earlier,  for  Exception  for  small  business  taxpay-
        You  do  not  need  to  complete       how to report your loss.                        ers. If you are a small business taxpay-
TIP     line 32 if line 7 is more than the                                                     er, you can choose not to keep an inven-
        total of lines 28 and 30.              If you answered “No” on line G, you 
                                                                                               tory, but you must still use a method of 
                                               may need to complete Form 8582 to fig-
                                                                                               accounting for inventory that clearly re-
                                               ure your loss to enter on line 31. See the 
At-risk  rules. In  most  cases,  if  you                                                      flects income. If you choose not to keep 
                                               Instructions for Form 8582 for details.
have a business loss and amounts inves-                                                        an  inventory,  you  won't  be  treated  as 
ted in the business for which you are not      Some  investment  is  not  at  risk.   If       failing to clearly reflect income if your 
at risk, complete Form 6198 to apply a         some  investment  is  not  at  risk,  check     method  of  accounting  for  inventory 
limitation  that  may  reduce  your  loss.     box 32b; the at-risk rules apply to your        treats inventory as non-incidental mate-
The  at-risk  rules  generally  limit  the     loss.  Be  sure  to  attach  Form  6198  to     rial or supplies, or conforms to your fi-
amount  of  loss  (including  loss  on  the    your return.                                    nancial accounting treatment of invento-
disposition  of  assets)  you  can  claim  to  If  you  answered  "Yes"  on  line  G,          ries. If, however, you choose to keep an 
the  amount  you  could  actually  lose  in    complete Form 6198 to figure the loss to        inventory, you must generally value the 
the business.                                  enter  on  line  31.  The  passive  activity    inventory  each  year  to  determine  your 
Check box 32b if you have amounts              loss rules do not apply. See Line 31, ear-      cost of goods sold in Part III of Sched-
invested in this business for which you        lier, for how to report your loss.              ule C.
are not at risk, such as the following.        If you answered "No" on line G, the             Small business taxpayer.      You quali-
•     Nonrecourse loans used to finance        passive  activity  loss  rules  may  apply.     fy as a small business taxpayer if you (a) 
the business, to acquire property used in      First, complete Form 6198 to figure the         have  average  annual  gross  receipts  of 
the business, or to acquire the business       amount  of  your  profit  or  (loss)  for  the  $29  million  or  less  for  the  3  prior  tax 
that are not secured by your own proper-       at-risk  activity,  which  may  include         years,  and  (b)  are  not  a  tax  shelter  (as 
ty (other than property used in the busi-      amounts  reported  on  other  forms  and        defined in section 448(d)(3)).
ness), and for which you are not person-       schedules, and the at-risk amount for the       If your business has not been in exis-
ally responsible to repay. However, there      activity.  Follow  the  Instructions  for       tence  for  all  of  the  3-tax-year  period 
is  an  exception  for  certain  nonrecourse   Form  6198  to  determine  how  much  of        used in figuring average gross receipts, 
financing  borrowed  by  you  in  connec-      your  Schedule  C  loss  will  be  allowed.     base  your  average  on  the  period  it  has 
tion with holding real property. See the       After you figure the amount of your loss        existed, and if your business has a pred-
Instructions  for  Form  6198  and  Pub.       that  is  allowed  under  the  at-risk  rules,  ecessor entity, include the gross receipts 
925.                                           you may need to complete Form 8582 to           of  the  predecessor  entity  from  the 
                                               figure  the  passive  activity  loss  to  enter 3-tax-year period when figuring average 

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gross receipts. If your business (or pred-    new method of accounting and enter the 
ecessor  entity)  had  short  tax  years  for result on line 35. If there is a difference  Part V. Other 
any  of  the  3-tax-year  period,  annualize  between  last  year's  closing  inventory 
your  business'  gross  receipts  for  the    and the refigured amount, attach an ex-      Expenses. Line 48
short  tax  years  that  are  part  of  the   planation and take it into account when      Include all ordinary and necessary busi-
3-tax-year period.                            figuring your section 481(a) adjustment.     ness  expenses  not  deducted  elsewhere 
See Pub. 538 for more information.            For details, see the example under  Line     on Schedule C. List the type and amount 
                                              F, earlier.                                  of each expense separately in the space 
Treating inventory as non-incidental 
                                                                                           provided. Enter the total on lines 48 and 
material or supplies.  If you account for 
                                                                                           27a. Do not include the cost of business 
inventories  as  materials  and  supplies 
that  are  not  incidental,  you  deduct  the Part IV. Information                         equipment or furniture; replacements or 
                                                                                           permanent improvements to property; or 
amounts paid to acquire or produce the        on Your Vehicle                              personal,  living,  and  family  expenses. 
inventoriable items (treated as materials 
                                                                                           Do not include charitable contributions. 
and supplies) in the year in which they 
are first used or consumed in your oper-      Line 44b                                     Also, you cannot deduct fines or penal-
                                                                                           ties  paid  to  a  government  for  violating 
ations.                                       In  most  cases,  commuting  is  travel  be-
                                                                                           any law. For details on business expen-
                                              tween your home and a work location. If 
Financial  accounting  treatment  of                                                       ses, see Pub. 334, chapter 8.
                                              you  converted  your  vehicle  during  the 
inventories. Your  financial  accounting                                                   Amortization. Include  amortization  in 
                                              year  from  personal  to  business  use  (or 
treatment  of  inventories  is  determined                                                 this part. For amortization that begins in 
                                              vice versa), enter your commuting miles 
with regard to the method of accounting                                                    2023, complete and attach Form 4562.
                                              only for the period you drove your vehi-
you  use  in  your  applicable  financial 
                                              cle for business.                            You can amortize such costs as:
statement  (as  defined  in  section  451(b)
(3)) or, if you do not have an applicable      Travel that meets any of the follow-        •    The  cost  of  pollution-control  fa-
                                                                                           cilities;
financial  statement,  with  regard  to  the  ing  conditions  isn't  commuting;  it  is 
method  of  accounting  you  use  in  your    considered deductible business travel.       •    Amounts paid for research and ex-
                                                                                           perimentation;
books  and  records  that  have  been  pre-    • You have at least one regular work 
pared in accordance with your account-        location away from your home and the         •    Amounts  paid  to  acquire,  protect, 
                                                                                           expand,  register,  or  defend  trademarks 
ing procedures.                               travel is to a temporary work location in 
                                                                                           or trade names; or
                                              the same trade or business, regardless of 
More  information.     For  more  infor-                                                   •    Goodwill and certain other intangi-
                                              the distance. Generally, a temporary 
mation  about  this  exception  for  small                                                 bles.
                                              work location is one where your 
businesses using this method of account-                                                   In  most  cases,  you  cannot  amortize 
                                              employment is expected to last 1 year or 
ing  for  inventoriable  items,  see  Pub.                                                 real property construction period interest 
                                              less. See Pub. 463 for more details.
538.                                                                                       and  taxes.  Special  rules  apply  for  allo-
                                               • The travel is to a temporary work 
Changing  your  method  of  account-          location outside the metropolitan area       cating interest to real or personal proper-
ing  for  inventory.   If  you  want  to      where you live and normally work.            ty produced in your trade or business.
change  your  method  of  accounting  for      • Your home is your principal place         For  a  complete  list,  see  the  instruc-
inventory,  file  Form  3115.  For  details,  of business under section 280A(c)(1)(A)      tions for Form 4562, Part VI.
see Line F, earlier.                          (for purposes of deducting expenses for      At-risk loss deduction.       Any loss from 
                                              business use of your home) and the 
        Certain  direct  and  indirect  ex-                                                this  business  that  was  not  allowed  last 
                                              travel is to another work location in the    year because of the at-risk rules is trea-
CAUTION ized  or  included  in  inventory. 
!       penses may have to be capital-        same trade or business, regardless of        ted as a deduction allocable to this busi-
                                              whether that location is regular or 
See Part II, earlier. See Pub. 538 for ad-                                                 ness in 2023.
                                              temporary and regardless of distance.
ditional information.                                                                      Bad  debts.  Include  debts  and  partial 
                                                                                           debts from sales or services that were in-
                                              Line 47                                      cluded  in  income  and  are  definitely 
Line 33                                       Specific  recordkeeping  rules  apply  to    known to be worthless. If you later col-
Your  inventories  can  be  valued  at  cost, car  or  truck  expenses.  For  more  infor- lect  a  debt  that  you  deducted  as  a  bad 
the lower of cost or market, or any other     mation  about  what  records  you  must      debt,  include  it  as  income  in  the  year 
method approved by the IRS.                   keep, see Pub. 463.                          collected.  For  details,  see Pub.  334, 
                                                                                           chapter 8.
Line  33  doesn't  apply  to  filers  of       You  may  maintain  written  evidence 
Form 1040-SS.                                 by  using  an  electronic  storage  system   Business  startup  costs.     If  your  busi-
                                              that  meets  certain  requirements.  For     ness began in 2023, you can elect to de-
                                              more  information  about  electronic  stor-  duct  up  to  $5,000  of  certain  business 
Line 35                                       age systems, see Pub. 583.                   startup  costs.  The  $5,000  limit  is  re-
If you are changing your method of ac-                                                     duced  (but  not  below  zero)  by  the 
counting  beginning  with  2023,  refigure                                                 amount by which your total startup costs 
last  year's  closing  inventory  using  your                                              exceed $50,000. Your remaining startup 

C-16

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costs  can  be  amortized  over  a             paid for tangible property up to $2,500      figure  and  collect  the  right  amount  of 
180-month  period,  beginning  with  the       per item or invoice.                         tax.
month the business began.                      Only  deduct  these  amounts  as  other      You  are  not  required  to  provide  the 
For  details,  see IRS.gov/Newsroom/           expenses.  Don't  include  these  amounts    information requested on a form that is 
Heres-how-businesses-can-deduct-               on any other line.                           subject to the Paperwork Reduction Act 
startup-costs-from-their-federal-taxes.        For  details  on  making  this  election     unless  the  form  displays  a  valid  OMB 
For  amortization  that  begins  in  2023,     and requirements for using the de mini-      control number. Books or records relat-
complete and attach Form 4562.                 mis  safe  harbor  for  tangible  property,  ing to a form or its instructions must be 
Deduction  for  removing  barriers  to         see chapter 8 of Pub. 334.                   retained  as  long  as  their  contents  may 
                                                                                            become material in the administration of 
individuals  with  disabilities  and  the      Film and television and live theatrical 
                                                                                            any Internal Revenue law. Generally, tax 
elderly. You may be able to deduct up          production expenses.  You can elect to 
                                                                                            returns and return information are confi-
to  $15,000  of  costs  paid  or  incurred  in deduct costs of certain qualified film and 
                                                                                            dential, as required by section 6103.
2023  to  remove  architectural  or  trans-    television  productions  or  qualified  live 
portation  barriers  to  individuals  with     theatrical  productions.  See  section  181, The time needed to complete and file 
disabilities  and  the  elderly.  However,     for details.                                 Schedule  C  (Form  1040)  will  vary  de-
you cannot take both a credit (on Form                                                      pending  on  individual  circumstances. 
                                               Forestation  and  reforestation  costs. 
8826) and a deduction for the same ex-                                                      The estimated burden for individual tax-
                                               Reforestation costs are generally capital 
penditures.                                                                                 payers filing this form is included in the 
                                               expenditures.  However,  for  each  quali-
                                                                                            estimates  shown  in  the  instructions  for 
De  minimis  safe  harbor  for  tangible       fied timber property, you can elect to ex-
                                                                                            their  individual  income  tax  return.  The 
property. Generally,  you  must  capital-      pense up to $10,000 ($5,000 if married 
                                                                                            estimated burden for all other taxpayers 
ize  costs  to  acquire  or  produce  real  or filing separately) of qualifying reforesta-
                                                                                            who  file  this  form  is  approved  under 
tangible personal property used in your        tion costs paid or incurred in 2023.
trade  or  business,  such  as  buildings,                                                  OMB control number 1545-1974 and is 
                                               You can elect to amortize the remain-
equipment, or furniture. However, if you                                                    shown next.
                                               ing costs over 84 months. For amortiza-
elect to use the de minimis safe harbor 
                                               tion  that  begins  in  2023,  complete  and 
for tangible property, you may deduct de                                                    Recordkeeping . . . . . . . . .    3 hr., 36 min.
                                               attach Form 4562.                            Learning about the law or the 
minimis amounts paid to acquire or pro-                                                     form . . . . . . . . . . . . . . . 1 hr., 19 min.
duce  certain  tangible  property  if  these   The amortization election and the ex-
                                                                                            Preparing the form. . . . . . .    1 hr., 39 min.
amounts are deducted by you for finan-         pense election don’t apply to trusts. For    Copying, assembling, and sending 
cial  accounting  purposes  or  in  keeping    details  on  reforestation  expenses,  see   the form to the IRS  . . . . . .   34 min.
your books and records.                        chapter 4 of Pub. 225.
If  you  have  an  applicable  financial       Paperwork Reduction Act Notice.     We 
                                                                                            If you have comments concerning the 
statement, you may use this safe harbor        ask  for  the  information  on  Schedule  C 
                                                                                            accuracy of these time estimates or sug-
to  deduct  amounts  paid  for  tangible       (Form  1040)  to  carry  out  the  Internal 
                                                                                            gestions  for  making  this  form  simpler, 
property  up  to  $5,000  per  item  or  in-   Revenue laws of the United States. You 
                                                                                            we  would  be  happy  to  hear  from  you. 
voice. If you don't have an applicable fi-     are required to give us the information. 
                                                                                            See  the  instructions  for  the  tax  return 
nancial  statement,  you  may  use  the  de    We need it to ensure that you are com-
                                                                                            with which this form is filed.
minimis  safe  harbor  to  deduct  amounts     plying with these laws and to allow us to 

                                                                                                                               C-17

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Principal Business or 
Professional Activity 
Codes
North American Industry                                     six-digit codes are based on the North American              estate agent). Now find the six-digit code assigned to 
Classification System (NAICS).                              Industry Classification System (NAICS).                      this activity (for example, 531210, the code for offices 
                                                                  Select the category that best describes your           of real estate agents and brokers) and enter it on 
These codes for the Principal Business or Professional      primary business activity (for example, Real Estate).        Schedule C, line B.
Activity classify sole proprietorships by the type of       Then select the activity that best identifies the principal        Note. If your principal source of income is from 
activity they are engaged in to facilitate the              source of your sales or receipts (for example, real          farming activities, you should file Schedule F.
administration of the Internal Revenue Code. These 
Accommodation, Food                            113000  Forestry & logging (including       238170 Siding contractors                621400   Outpatient care centers
Services, & Drinking Places                            forest nurseries & timber tracts)   238910 Site preparation contractors      621900   Other ambulatory health care 
                                               114210  Hunting & trapping                  238120 Structural steel & precast                 services (including ambulance 
Accommodation                                  Support Activities for Agriculture &               concrete construction                      services, blood, & organ banks)
721310   Rooming & boarding houses,            Forestry                                           contractors                       Hospitals
         dormitories, & workers' camps         115210  Support activities for animal       238340 Tile & terrazzo contractors       622000   Hospitals
721210   RV (recreational vehicle) parks               production (including farriers)     238290 Other building equipment          Nursing & Residential Care Facilities
         & recreational camps                  115110  Support activities for crop                contractors                       623000   Nursing & residential care 
721100   Traveler accommodation                        production (including cotton        238390 Other building finishing                   facilities
         (including hotels, motels, & bed              ginning, soil preparation,                 contractors                       Social Assistance
         & breakfast inns)                             planting, & cultivating)            238190 Other foundation, structure, &    624410   Childcare services
Food Services & Drinking Places                115310  Support activities for forestry            building exterior contractors     624200   Community food & housing, & 
722514   Cafeterias, grill buffets, &          Arts, Entertainment, &                      238990 All other specialty trade                  emergency & other relief 
         buffets                                                                                  contractors                                services
722410   Drinking places (alcoholic            Recreation
         beverages)                            Amusement, Gambling, & Recreation           Educational Services                     624100   Individual & family services
722511   Full-service restaurants              Industries                                  611000 Educational services (including   624310   Vocational rehabilitation 
722513   Limited-service restaurants           713100  Amusement parks & arcades                  schools, colleges, &                       services
722515   Snack & non-alcoholic beverage        713200  Gambling industries                        universities)                     Information
         bars                                  713900  Other amusement & recreation        Finance & Insurance                      Publishing Industries
722300   Special food services (including              services (including golf courses,   Credit Intermediation & Related          513000   Publishing industries
         food service contractors &                    skiing facilities, marinas, fitness Activities                               Broadcasting & Content Providers & 
         caterers)                                     centers, bowling centers, skating   522100 Depository credit intermediation  Telecommunications
                                                       rinks, miniature golf courses)
Administrative & Support and                   Museums, Historical Sites, & Similar               (including commercial banking,    516000   Broadcasting & content 
Waste Management &                             Institutions                                       savings institutions, & credit             providers
                                                                                                  unions)
Remediation Services                           712100  Museums, historical sites, &        522200 Nondepository credit              517000   Telecommunications (including 
Administrative & Support Services                      similar institutions                       intermediation (including sales            Wired, Wireless, Satellite, Cable 
561430   Business service centers              Performing Arts, Spectator Sports, &               financing & consumer lending)              & Other Program Distribution, 
                                                                                                                                             Resellers, Agents, Other 
         (including private mail centers       Related Industries                          522300 Activities related to credit               Telecommunications, & Internet 
         & copy shops)                         711410  Agents & managers for artists,             intermediation (including loan             service providers)
561740   Carpet & upholstery cleaning                  athletes, entertainers, & other            brokers)                          Data Processing, Web Search Portals, & 
         services                                      public figures                      Insurance Agents, Brokers, & Related     Other Information Services
561440   Collection agencies                   711510  Independent artists, writers, &     Activities                               518210   Computing infrastructure 
561450   Credit bureaus                                performers                          524210 Insurance agencies &                       providers, data processing, web 
561410   Document preparation services         711100  Performing arts companies                  brokerages                                 hosting, & related services
561300   Employment services                   711300  Promoters of performing arts,       524290 Other insurance related           519200   Web search portals, libraries, 
                                                       sports, & similar events                   activities                                 archives, & other info. services
561710   Exterminating & pest control          711210  Spectator sports (including         Securities, Commodity Contracts, &       Motion Picture & Sound Recording
         services                                      professional sports clubs &         Other Financial Investments & Related    512100   Motion picture & video 
561210   Facilities support (management)               racetrack operations)               Activities                                        industries (except video rental)
         services                              Construction of Buildings                   523160 Commodity contracts               512200   Sound recording industries
561600   Investigation & security services                                                        intermediation
561720   Janitorial services                   236200  Nonresidential building             523150 Investment banking & securities   Manufacturing
                                                       construction
561730   Landscaping services                  236100  Residential building                       intermediation                    315000   Apparel mfg.
561110   Office administrative services                construction                        523210 Securities & commodity            312000   Beverage & tobacco product 
561420   Telephone call centers                Heavy and Civil Engineering                        exchanges                                  mfg.
         (including telephone answering        Construction                                523900 Other financial investment        334000   Computer & electronic product 
         services & telemarketing              237310  Highway, street, & bridge                  activities (including investment           mfg.
         bureaus)                                      construction                               advice)                           335000   Electrical equipment, appliance, 
561500   Travel arrangement &                  237210  Land subdivision                    Health Care & Social Assistance                   & component mfg.
         reservation services                                                              Ambulatory Health Care Services          332000   Fabricated metal product mfg.
561490   Other business support services       237100  Utility system construction
         (including repossession services,  237990     Other heavy & civil engineering     621610 Home health care services         337000   Furniture & related product mfg.
         court reporting, & stenotype                  construction                        621510 Medical & diagnostic              333000   Machinery mfg.
         services)                             Specialty Trade Contractors                        laboratories                      339110   Medical equipment & supplies 
561790   Other services to buildings &         238310  Drywall & insulation                621310 Offices of chiropractors                   mfg.
         dwellings                                     contractors                         621210 Offices of dentists               322000   Paper mfg.
561900   Other support services                238210  Electrical contractors              621330 Offices of mental health          324100   Petroleum & coal products mfg.
         (including packaging & labeling       238350  Finish carpentry contractors               practitioners (except physicians) 326000   Plastics & rubber products mfg.
         services, & convention & trade        238330  Flooring contractors                621320 Offices of optometrists           331000   Primary metal mfg.
         show organizers)                                                                  621340 Offices of physical,              323100   Printing & related support 
Waste Management & Remediation                 238130  Framing carpentry contractors
Services                                       238150  Glass & glazing contractors                occupational & speech                      activities
                                                                                                  therapists, & audiologists        313000   Textile mills
562000   Waste management &                    238140  Masonry contractors                 621111 Offices of physicians (except     314000   Textile product mills
         remediation services                  238320  Painting & wall covering                   mental health specialists)        336000   Transportation equipment mfg.
Agriculture, Forestry, Hunting, &                      contractors                         621112 Offices of physicians, mental     321000   Wood product mfg.
Fishing                                        238220  Plumbing, heating & air-                   health specialists
                                                       conditioning contractors            621391 Offices of podiatrists            339900   Other miscellaneous mfg.
112900   Animal production (including          238110  Poured concrete foundation &        621399 Offices of all other              Chemical Manufacturing
         breeding of cats and dogs)                    structure contractors                      miscellaneous health              325100   Basic chemical mfg.
114110   Fishing                               238160  Roofing contractors                        practitioners

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North American Industry Classification System (NAICS). (Continued)
325500 Paint, coating, & adhesive mfg.   811190   Other automotive repair &           532282 Video tape & disc rental          459410 Office supplies & stationery 
325300 Pesticide, fertilizer, & other             maintenance (including oil          532289 Other consumer goods rental              retailers
       agricultural chemical mfg.                 change & lubrication shops &                                                 459910 Pet & pet supplies retailers
325410 Pharmaceutical & medicine                  car washes)                         Religious, Grantmaking, Civic,           459510 Used merchandise retailers
       mfg.                              811310   Commercial & industrial             Professional, & Similar                  459990 All other miscellaneous retailers 
325200 Resin, synthetic rubber, &                 machinery & equipment (except       Organizations                                   (including tobacco, candle, & 
       artificial & synthetic fibers &            automotive & electronic) repair                                                     trophy retailers)
       filaments mfg.                             & maintenance                       813000 Religious, grantmaking, civic, 
325600 Soap, cleaning compound, &        811210   Electronic & precision                     professional, & similar           Nonstore Retailers
       toilet preparation mfg.                    equipment repair & maintenance             organizations                     xx     Nonstore retailers sell all types 
325900 Other chemical product &          811430   Footwear & leather goods repair     Retail Trade                                    of merchandise using such 
       preparation mfg.                  811410   Home & garden equipment &           Building Material & Garden                      methods as Internet, mail-order 
Food Manufacturing                                appliance repair & maintenance      Equipment & Supplies Dealers                    catalogs, interactive television, 
                                                                                                                                      or direct sales. These types of 
311110 Animal food mfg.                  811420   Reupholstery & furniture repair     444140 Hardware retailers                       Retailers should select the PBA 
311800 Bakeries, tortilla, & dry pasta   811490   Other personal & household          444110 Home centers                             associated with their primary 
       mfg.                                       goods repair & maintenance          444200 Lawn & garden equipment &                line of products sold.
311500 Dairy product mfg.                Professional, Scientific, &                         supplies retailers                xx     For example, establishments 
311400 Fruit & vegetable preserving &    Technical Services                           444120 Paint & wallpaper retailers              primarily selling prescription 
                                                                                                                                      and non-prescription drugs, 
       speciality food mfg.              541100   Legal services                      444180 Other building materials dealers         select PBA code 456110 
311200 Grain & oilseed milling           541211   Offices of certified public         Clothing & Accessories Retailers                Pharmacies & Drug Retailers.
311610 Animal slaughtering &                      accountants                         458110 Clothing & clothing accessories   Transportation & Warehousing
       processing                        541214   Payroll services                           retailers                         481000 Air transportation
311710 Seafood product preparation &     541213   Tax preparation services            458310 Jewelry retailers                 485510 Charter bus industry
       packaging                         541219   Other accounting services           458320 Luggage & leather goods           484110 General freight trucking, local
                                                                                             retailers
311300 Sugar & confectionery product     Architectural, Engineering, & Related        458210 Shoe retailers                    484120 General freight trucking, long 
       mfg.                              Services                                     Electronic & Appliance Retailers                distance
311900 Other food mfg. (including        541310   Architectural services              449210 Electronics & appliance retailers 485210 Interurban & rural bus 
       coffee, tea, flavorings, &                                                                                                     transportation
       seasonings)                       541350   Building inspection services               (including computers)             486000 Pipeline transportation
Leather & Allied Product                 541340   Drafting services                   Food & Beverage Retailers                482110 Rail transportation
Manufacturing                            541330   Engineering services                445320 Beer, wine, & liquor retailers    487000 Scenic & sightseeing 
316210 Footwear mfg. (including          541360   Geophysical surveying &             445250 Fish & seafood retailers                 transportation
       leather, rubber, & plastics)               mapping services                    445230 Fruit & vegetable retailers       485410 School & employee bus 
316110 Leather & hide tanning &          541320   Landscape architecture services     445100 Grocery & convenience retailers          transportation
       finishing                         541370   Surveying & mapping (except         445240 Meat retailers                    484200 Specialized freight trucking 
316990 Other leather & allied product             geophysical) services
       mfg.                              541380   Testing laboratories & services     445290 Other specialty food retailers           (including household moving 
Nonmetallic Mineral Product              Computer Systems Design & Related            445132 Vending machine operators                vans)
Manufacturing                            Services                                     Furniture & Home Furnishings             485300 Taxi, limousine, & ridesharing 
327300 Cement & concrete product         541510   Computer systems design &           Retailers                                       service
       mfg.                                       related services                    449110 Furniture retailers               485110 Urban transit systems
327100 Clay product & refractory mfg.    Specialized Design Services                  449120 Home furnishings retailers        483000 Water transportation
327210 Glass & glass product mfg.        541400   Specialized design services         Gasoline Stations & Fuel dealers         485990 Other transit & ground 
                                                                                                                                      passenger transportation
327400 Lime & gypsum product mfg.                 (including interior, industrial,    457100 Gasoline stations (including      488000 Support activities for 
327900 Other nonmetallic mineral                  graphic, & fashion design)                 convenience stores with gas)             transportation (including motor 
       product mfg.                      Other Professional, Scientific, &            457210 Fuel dealers (including heating          vehicle towing)
Mining                                   Technical Services                                  oil & liquefied petroleum)        Couriers & Messengers
212110 Coal mining                       541800   Advertising, public relations, &    General Merchandise Retailers            492000 Couriers & messengers
                                                  related services                    455000 General merchandise retailers     Warehousing & Storage Facilities
212200 Metal ore mining                           technical consulting services
211120 Crude petroleum extraction        541600   Management, scientific, &           Health & Personal Care Retailers         493100 Warehousing & storage (except 
211130 Natural gas extraction            541910   Market research & public            456120 Cosmetics, beauty supplies, &            leases of miniwarehouses & 
212300 Nonmetallic mineral mining &               opinion polling                            perfume retailers                        self-storage units)
       quarrying                         541920   Photographic services               456130 Optical goods retailers           Utilities
213110 Support activities for mining     541700   Scientific research &               456110 Pharmacies & drug retailers       221000 Utilities
Other Services                                    development services                456190 Other health & personal care 
Personal & Laundry Services              541930   Translation & interpretation               retailers                         Wholesale Trade
                                                  services                            Motor Vehicle & Parts Dealers            Merchant Wholesalers, Durable Goods
812111 Barber shops                      541940   Veterinary services                 441300 Automotive parts, accessories,    423200 Furniture & home furnishing
812112 Beauty salons                     541990   All other professional, scientific,        & tire retailers                  423700 Hardware, & plumbing & 
812220 Cemeteries & crematories                   & technical services                441222 Boat dealers                             heating equipment & supplies
812310 Coin-operated laundries &         Real Estate & Rental & Leasing               441227 Motorcycle, ATV, & all other      423600 Household appliances & 
       drycleaners                                                                           motor vehicle dealers                    electrical & electronic goods
812320 Drycleaning & laundry services    Real Estate                                  441110 New car dealers                   423940 Jewelry, watch, precious stone, 
       (except coin-operated)            531100   Lessors of real estate (including   441210 Recreational vehicle dealers             & precious metals
       (including laundry &                       miniwarehouses & self-storage              (including motor home & travel    423300 Lumber & other construction 
       drycleaning drop-off & pickup              units)                                     trailer dealers)                         materials
       sites)                            531210   Offices of real estate agents &     441120 Used car dealers                  423800 Machinery, equipment, & 
812210 Funeral homes & funeral                    brokers                             Sporting Goods, Hobby, Book, Musical            supplies
       services                          531320   Offices of real estate appraisers   Instrument & Miscellaneous Retailers     423500 Metal & mineral (except 
812330 Linen & uniform supply            531310   Real estate property managers       459210 Book retailers & news dealers            petroleum)
812113 Nail salons                       531390   Other activities related to real           (including newsstands)            423100 Motor vehicle & motor vehicle 
812930 Parking lots & garages                     estate                              459120 Hobby, toy, & game retailers             parts & supplies
812910 Pet care (except veterinary)      Rental & Leasing Services                    459140 Musical instrument & supplies     423400 Professional & commercial 
       services                          532100   Automotive equipment rental &              retailers                                equipment & supplies
812920 Photofinishing                             leasing                             459130 Sewing, needlework, & piece       423930 Recyclable materials
812190 Other personal care services      532400   Commercial & industrial                    goods retailers                   423910 Sporting & recreational goods & 
       (including diet & weight                   machinery & equipment rental        459110 Sporting goods retailers                 supplies
       reducing centers)                          & leasing                           459920 Art dealers                       423920 Toy & hobby goods & supplies
812990 All other personal services       532210   Consumer electronics &              459310 Florists                          423990 Other miscellaneous durable 
Repair & Maintenance                              appliances rental                                                                   goods
811120 Automotive body, paint, interior, 532281   Formal wear & costume rental        459420 Gift, novelty, & souvenir 
       & glass repair                    532310   General rental centers                     retailers                         Merchant Wholesalers, Nondurable 
811110 Automotive mechanical &           532283   Home health equipment rental        459930 Manufactured (mobile) home        Goods
                                                                                             dealers                           424300 Apparel, piece goods, & notions
       electrical repair & maintenance   532284   Recreational goods rental

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North American Industry Classification System (NAICS). (Continued)
424800 Beer, wine, & distilled alcoholic 424910 Farm supplies              424700          Petroleum & petroleum products Wholesale Trade Agents & 
       beverages                         424930 Flower, nursery stock, & florists'  424940 Tobacco products & electronic  Brokers
424920 Books, periodicals, &                    supplies                                   cigarettes
       newspapers                        424400 Grocery & related products 424990          Other miscellaneous nondurable 425120 Wholesale trade agents & 
424600 Chemical & allied products        424950 Paint, varnish, & supplies                 goods                                 brokers
424210 Drugs & druggists' sundries       424100 Paper & paper products                                                    999000 Unclassified establishments 
424500 Farm product raw materials                                                                                                (unable to classify)

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