quick reference for Part II (Expenses) of IRS Schedule C (Form 1040). these are the lines you assign to each business expense.
expense lines
- Line 8 - Advertising: marketing, ads, promotional materials, sponsored posts
- Line 9 - Car and truck: business use of vehicle (mileage or actual expenses)
- Line 10 - Commissions and fees: payment processor fees (Stripe fees, PayPal fees), affiliate commissions, marketplace fees
- Line 11 - Contract labor: freelancers, contractors, outsourced work (not employees)
- Line 12 - Depletion: rarely used for software businesses
- Line 13 - Depreciation: equipment purchases over $2,500 (or Section 179 for immediate deduction)
- Line 14 - Employee benefit programs: health insurance, retirement contributions for employees
- Line 15 - Insurance: business insurance, E&O, liability, cyber insurance
- Line 16a - Mortgage interest: business property mortgage
- Line 16b - Other interest: business loan interest, business credit card interest
- Line 17 - Legal and professional services: lawyers, accountants, tax prep, registered agent fees
- Line 18 - Office expense: software subscriptions, SaaS tools, office supplies, printer ink, desk accessories
- Line 19 - Pension and profit-sharing: retirement plan contributions
- Line 20a - Rent (vehicles, machinery): equipment leases
- Line 20b - Rent (other business property): office rent, coworking space
- Line 21 - Repairs and maintenance: equipment repairs, maintenance contracts
- Line 22 - Supplies: consumable materials used in business
- Line 23 - Taxes and licenses: state/local business taxes, business licenses, LLC fees, franchise tax
- Line 24a - Travel: flights, hotels, transportation for business trips
- Line 24b - Meals: business meals (50% deductible), client meals
- Line 25 - Utilities: internet, phone, electricity (business portion)
- Line 26 - Wages: employee salaries (not contractors - those go on Line 11)
- Line 27a - Other expenses: anything that doesn't fit above. list details on Part V
common mappings for software businesses
- hosting (AWS, Cloudflare, Vercel) → Line 18
- domain registrations → Line 18
- dev tools (GitHub, JetBrains) → Line 18
- design tools (Figma, Adobe) → Line 18
- analytics (Mixpanel, Amplitude) → Line 18
- email services (Postmark, Sendgrid) → Line 18
- payment processing fees → Line 10
- freelance developers/designers → Line 11
- lawyer, accountant → Line 17
- registered agent → Line 17
- state LLC filing fees → Line 23
- coworking space → Line 20b
- business phone plan → Line 25
- business internet → Line 25
- business travel → Line 24a
- conference tickets → Line 27a
notes
- mixed-use expenses: apply your business percentage before assigning to a line
- meals are only 50% deductible even if 100% business
- home office deduction is separate (Form 8829), not a Schedule C line
- when in doubt, Line 27a (other) works as a catch-all. list what it is in Part V
- keep receipts for everything over $75
related
- schedule c guide - understanding Schedule C and business vs personal expenses