Federal and state unemployment tax belongs on Line 23, taxes and licenses.
Why line 23
Federal unemployment tax you pay on employee wages is deductible on line 23, and so are contributions to a state unemployment insurance fund where state law treats them as a tax. These are employer taxes, not withholdings, so nothing about them is already inside the wages figure on line 26. A state disability benefit fund contribution follows the same rule where the state treats it as a tax on the employer.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so federal and state unemployment tax lands on Line 23 without you sorting it.
Start for freeWhat federal and state unemployment tax is confused with
- Line 26, wages
- Wages are line 26, while the unemployment tax you pay on those wages is line 23.
- Schedule A, schedule a, personal itemised deduction
- An employee contribution to a state fund withheld from pay is the employee's cost and can be a Schedule A item for them, not a line 23 deduction for you.
- not deductible, not deductible
- A penalty for filing Form 940 late is a government penalty and is not deductible.
Examples that belong on line 23
- $420 of FUTA on $70,000 of wages at the net rate after the state credit
- $1,860 of state unemployment insurance contributions for the year
- A $465 quarterly state unemployment deposit
- $210 of state disability fund contributions the state treats as an employer tax
- $84 of FUTA for a single part time employee
What does not belong here
- Amounts withheld from employee pay for a state fund.
- Your own self employment tax.
- A penalty or interest on a late unemployment filing.
- Voluntary contributions to lower a future experience rate, where state law does not treat them as a tax.
What to keep
Keep the annual Form 940, the state unemployment quarterly returns and the deposit records. If your state rate changed mid year, keep the rate notice with the returns.
Other expenses on line 23
| Expense | Line |
|---|---|
| a city or county business license | Schedule C, Line 23 |
| a state franchise tax or LLC annual fee | Schedule C, Line 23 |
| a state professional license renewal | Schedule C, Line 23 |
| employer payroll taxes and the employer half of FICA | Schedule C, Line 23 |
| personal property tax on business equipment | Schedule C, Line 23 |
| real estate property tax on a business building | Schedule C, Line 23 |
| sales tax you collected and remitted | Schedule C, Line 23 |
Related lookups
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- Is a car payment deductible 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.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so federal and state unemployment tax lands on Line 23 without you sorting it.
Start for free