Every expense on Schedule C has a specific line. Categorizing transactions correctly means faster tax prep, maximum deductions, and audit-ready records. Here's the complete mapping.
Schedule C Expense Lines Overview
Schedule C (Form 1040) reports profit or loss from a sole proprietorship. Part II lists expense categories on lines 8-27. Your transaction categorization should map directly to these lines.
Line-by-Line Expense Categories
Line 8: Advertising
What belongs here:
- Google Ads, Facebook Ads, LinkedIn Ads
- Print advertising (newspapers, magazines, flyers)
- Business cards, brochures, promotional materials
- Website hosting and domain registration
- SEO and marketing consultant fees
- Trade show booth fees
- Sponsorships and promotional events
Common vendors: Google, Meta/Facebook, GoDaddy, Squarespace, Wix, VistaPrint, Mailchimp
Line 9: Car and Truck Expenses
Choose one method:
- Standard mileage rate (67¢/mile for 2024): Track business miles only
- Actual expenses: Gas, oil, repairs, insurance, registration, depreciation
Important: You cannot deduct both. If you use standard mileage, only parking and tolls are additional deductions.
Common vendors: Shell, Chevron, BP, Jiffy Lube, AutoZone, State DMV
Line 10: Commissions and Fees
What belongs here:
- Sales commissions paid to non-employees
- Referral fees
- Finder's fees
- Platform fees (Etsy, eBay, Amazon seller fees)
Note: If you pay commissions over $600 to an individual, you must issue a 1099-NEC.
Line 11: Contract Labor
What belongs here:
- Payments to freelancers and independent contractors
- Subcontractor payments
- Virtual assistant services
- Freelance designers, writers, developers
1099 requirement: Issue 1099-NEC for payments $600+ to individuals (not corporations).
Common vendors: Upwork, Fiverr, individual contractor names
Line 12: Depletion
Only for businesses extracting natural resources (oil, gas, minerals, timber). Most small businesses skip this line.
Line 13: Depreciation and Section 179
What belongs here:
- Business equipment over $2,500
- Computers and electronics
- Furniture and fixtures
- Vehicles (business use portion)
- Building improvements
Important: These are not direct expenses—they're depreciated over time or deducted via Section 179 election. Requires Form 4562.
Line 14: Employee Benefit Programs
What belongs here:
- Health insurance premiums for employees
- Retirement plan contributions (employer portion)
- Group life insurance
- Dependent care assistance
Note: Self-employed health insurance is NOT deducted here—it goes on Schedule 1, Line 17.
Line 15: Insurance (Other Than Health)
What belongs here:
- General liability insurance
- Professional liability / E&O insurance
- Business property insurance
- Workers' compensation insurance
- Business interruption insurance
- Cyber liability insurance
Common vendors: State Farm, Progressive, Hiscox, The Hartford, NEXT Insurance
Line 16a: Interest (Mortgage)
Interest on mortgages for business property. For home office, calculate the business percentage.
Line 16b: Interest (Other)
What belongs here:
- Business credit card interest
- Business loan interest
- Line of credit interest
- Equipment financing interest
Line 17: Legal and Professional Services
What belongs here:
- Attorney fees (business-related)
- Accountant and bookkeeper fees
- Tax preparation fees (business portion)
- Consulting fees
- Professional licensing fees
Common vendors: Law firms, CPA firms, H&R Block (business), LegalZoom
Line 18: Office Expense
What belongs here:
- Office supplies (pens, paper, folders)
- Printer ink and toner
- Postage and shipping supplies
- Small equipment under $2,500 (can expense or depreciate)
- Cleaning supplies for office
- Coffee and kitchen supplies for office
Common vendors: Staples, Office Depot, Amazon (office supplies), USPS, UPS, FedEx
Line 19: Pension and Profit-Sharing Plans
Employer contributions to employee retirement plans. Self-employed retirement (SEP-IRA, Solo 401k) is deducted on Schedule 1, not here.
Line 20a: Rent or Lease (Vehicles, Machinery, Equipment)
What belongs here:
- Vehicle leases (business use portion)
- Equipment leases
- Copier/printer leases
Line 20b: Rent or Lease (Other Business Property)
What belongs here:
- Office rent
- Warehouse rent
- Storage unit rental
- Coworking space membership
Common vendors: WeWork, Regus, Public Storage, individual landlords
Line 21: Repairs and Maintenance
What belongs here:
- Equipment repairs
- Building repairs (business property)
- Computer and IT repairs
- Janitorial services
- Lawn care (business property)
Important: Improvements that add value or extend useful life should be capitalized, not expensed.
Line 22: Supplies
What belongs here:
- Materials used in providing services
- Supplies consumed in business operations
- Items that are not inventory but are used up
For many businesses, this overlaps with Line 18 (Office Expense). Be consistent.
Line 23: Taxes and Licenses
What belongs here:
- Business licenses and permits
- State and local business taxes
- Employer payroll taxes (employer portion of FICA)
- Property taxes on business property
- Sales tax paid on business purchases (if not included in cost)
Not deductible here: Federal income tax, self-employment tax (deducted elsewhere)
Line 24a: Travel
What belongs here:
- Airfare for business trips
- Hotel and lodging
- Rental cars during business travel
- Taxi, Uber, Lyft during business trips
- Conference registration fees
- Baggage fees
Common vendors: Airlines (United, Delta, Southwest), Hotels (Marriott, Hilton), Uber, Lyft, Airbnb
Line 24b: Deductible Meals
50% deductible:
- Meals with clients or business associates
- Meals while traveling for business
- Meals during business meetings
Requirements: Business purpose must be documented. Keep receipts for meals over $75.
Not deductible: Entertainment expenses (concerts, sporting events) are no longer deductible after 2017 tax reform.
Line 25: Utilities
What belongs here:
- Electricity for business location
- Gas/heating for business location
- Water and sewer
- Trash removal
- Business phone line
- Business internet
Home office: Calculate business percentage of home utilities.
Line 26: Wages
Gross wages paid to employees. Does not include payments to yourself (owner draws) or independent contractors.
Line 27a: Other Expenses
Commonly reported here:
- Software subscriptions (QuickBooks, Adobe, Microsoft 365)
- Cloud services (AWS, Google Cloud, Dropbox)
- Professional development and training
- Books and publications
- Bank fees and merchant processing fees
- Dues and subscriptions (trade associations)
- Business gifts (limited to $25 per recipient)
Categorization Tips for Tax Prep
Be Consistent
Pick a category and stick with it. If you categorize Dropbox as "Software" in January, don't switch to "Office Expense" in June.
When in Doubt, Use Other Expenses
Line 27 (Other Expenses) is a catch-all. If an expense doesn't fit neatly into lines 8-26, put it here with a clear description.
Keep Receipts for Meals and Travel
These categories are frequently audited. Document the business purpose, who attended, and what was discussed.
Separate Personal Expenses
Personal expenses in business accounts should be categorized as "Owner Draw" or "Personal"—never mixed into business expense categories.
Using TraceEntry for Schedule C
TraceEntry's categories map to Schedule C lines. When you export, you can configure your Chart of Accounts with Schedule C line numbers for direct tax prep integration.
Example account setup:
- 8000 - Advertising (Line 8)
- 8100 - Car and Truck (Line 9)
- 8200 - Contract Labor (Line 11)
- 8300 - Insurance (Line 15)
- 8400 - Office Expense (Line 18)
- 8500 - Travel (Line 24a)
- 8600 - Meals (Line 24b)