Is paying yourself or taking an owner's draw not deductible or line 26?

Line 26 is for employees, and a sole proprietor cannot be their own employee; employing a spouse or a child is different, and those wages do go on line 26.

Is paying yourself or taking an owner's draw not deductible or schedule 1 line 15?

You get no deduction for your own pay, but you do deduct half of the self-employment tax on it, on Schedule 1 line 15.

Where does an owner's draw go on Schedule C? Not Deductible

Q: Where does an owner's draw go on Schedule C?

Paying yourself or taking an owner's draw is not deductible on Schedule C. There is no line for it, because a sole proprietor cannot deduct payments to themselves. Money you move from the business account to your personal account is a draw, which is a transfer of your own money and not an expense. Your pay is the net profit on line 31: whatever is left after the real expenses is what you earned, and it is taxed as self-employment income whether you withdrew it or left it in the account. Putting a draw on line 26 understates profit and creates a wage deduction with no W-2 and no payroll filings behind it.

Short answer Not deductible

Paying yourself or taking an owner's draw is not a deductible business expense.

Why it is not deductible

There is no line for it, because a sole proprietor cannot deduct payments to themselves. Money you move from the business account to your personal account is a draw, which is a transfer of your own money and not an expense. Your pay is the net profit on line 31: whatever is left after the real expenses is what you earned, and it is taxed as self-employment income whether you withdrew it or left it in the account. Putting a draw on line 26 understates profit and creates a wage deduction with no W-2 and no payroll filings behind it.

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 paying yourself or taking an owner's draw is already written down.

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What paying yourself or taking an owner's draw is confused with

Line 26, wages: Line 26 is for employees, and a sole proprietor cannot be their own employee; employing a spouse or a child is different, and those wages do go on line 26.
Schedule 1 line 15, schedule 1 line 15, deductible part of self-employment tax: You get no deduction for your own pay, but you do deduct half of the self-employment tax on it, on Schedule 1 line 15.
Schedule 1 line 16, schedule 1 line 16, self-employed retirement plans: Your own retirement contributions are not a business expense either; they go on Schedule 1 line 16, not on line 19 with employee plans.

Examples people try to deduct here

$3,000 a month transferred to a personal account, not deductible
A $12,000 year-end withdrawal of accumulated profit, not deductible
A $5,000 owner payment processed through payroll software, still not deductible
$0 of owner compensation on line 26 with a $64,000 net profit on line 31
$8,400 paid to a spouse genuinely employed, which is deductible on line 26

What does not belong here

A draw entered as wages on line 26.
A draw entered as contract labor on line 11.
An owner salary run through payroll software on a sole proprietorship.
A management fee charged by the owner to their own business.

The limit that applies

An owner's draw is not an expense. The owner's pay is the Schedule C net profit, which is subject to self-employment tax whether or not it is withdrawn.

What to keep

Code owner transfers as draws in your books, not as an expense account, so they never reach the return. Keeping the business and personal accounts separate is what makes this easy to prove, and mixing them is what makes every other deduction harder to defend.

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
federal income tax	Not deductible
groceries for your home	Not deductible

Related lookups

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.

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