Federal income tax is not a deductible business expense.
Why it is not deductible
Federal income tax is not deductible anywhere on Schedule C. The line 23 instructions say so directly, and the logic is circular otherwise: income tax is computed on profit, so deducting it would change the number it is computed from. Estimated tax payments are not expenses either. They are payments against the tax you will owe, and they belong on the payments section of your Form 1040, not in Part II of Schedule C.
Log it once, with the line already on it. Type an expense in plain words in ClaryBook and it is filed with a date, vendor, amount and what it was for, so the number your preparer needs for federal income tax is already written down.
Start for freeWhat federal income tax is confused with
- Line 23, taxes and licenses
- Line 23 takes employer taxes on wages, property taxes on business assets and annual license fees, and explicitly excludes federal income taxes.
- Schedule 1 line 15, schedule 1 line 15, deductible part of self-employment tax
- The only tax of your own that gives you a deduction is half of the self employment tax, taken on Schedule 1 line 15.
- Schedule A, schedule a, personal itemised deduction
- State and local income tax can be a personal itemised deduction on Schedule A subject to the state and local tax cap, while federal income tax gives nothing.
Examples people try to deduct here
- A $4,000 quarterly federal estimated tax payment, which gives no Schedule C deduction
- A $9,200 balance paid with the return, which gives no deduction
- $0 on line 23 for federal income tax
- A $180 penalty for underpaying estimated tax, which is also not deductible
- Half of the self employment tax, which is deductible but on Schedule 1 rather than Schedule C
What does not belong here
- Estimated tax payments entered as a business expense.
- A line 27a entry labelled taxes paid.
- The balance due with your return.
- An underpayment penalty.
What to keep
Keep the payment records for your own reconciliation and for the payments section of Form 1040. They support the tax you have already paid, not a deduction.
Other things that are not deductible
| Expense | Line |
|---|---|
| a business suit | Not deductible |
| a government fine or penalty | Not deductible |
| a parking ticket | Not deductible |
| a personal expense on the business card | Not deductible |
| a spouse's airfare on your business trip | Not deductible |
| a traffic ticket | Not deductible |
| an unpaid invoice | Not deductible |
| commuting mileage | Not deductible |
| country club dues | Not deductible |
| estimated tax payments | Not deductible |
| groceries for your home | Not deductible |
| interest on underpaid federal income tax | Not deductible |
Related lookups
- Where does a business license go on Schedule C?
- Where does self employment tax go?
- Where does state income tax go on Schedule C?
Sources
This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.
Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.
Log it once, with the line already on it. Type an expense in plain words in ClaryBook and it is filed with a date, vendor, amount and what it was for, so the number your preparer needs for federal income tax is already written down.
Start for free