Is vacation and sick pay line 26 or line 14?

Paid leave is compensation on line 26; a disability or sick pay insurance policy you buy to cover employees is an employee benefit program on line 14.

Is vacation and sick pay line 26 or not deductible?

Time you took off yourself is not an expense at all, because a sole proprietor's own time is never deductible whether worked or not.

Where does vacation and sick pay go on Sch C? Line 26

Q: Where does vacation and sick pay go on Sch C?

Vacation and sick pay belongs on Line 26, wages. Paid time off is wages, so it goes on line 26 with the rest of payroll and it is not shown separately on Schedule C. Timing is the real question. On the cash basis you deduct vacation pay in the year you actually pay it, so leave an employee has earned but not taken is not yet a deduction, and the accrued balance in your books is not an expense on the return. Sick pay you fund yourself is wages; sick pay an insurer or a third-party payer provides is their payment, not your wage expense.

Short answer Schedule C, Line 26 Wages

Vacation and sick pay belongs on Line 26, wages.

Why line 26

Paid time off is wages, so it goes on line 26 with the rest of payroll and it is not shown separately on Schedule C. Timing is the real question. On the cash basis you deduct vacation pay in the year you actually pay it, so leave an employee has earned but not taken is not yet a deduction, and the accrued balance in your books is not an expense on the return. Sick pay you fund yourself is wages; sick pay an insurer or a third-party payer provides is their payment, not your wage expense.

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 vacation and sick pay lands on Line 26 without you sorting it.

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What vacation and sick pay is confused with

Line 14, employee benefit programs: Paid leave is compensation on line 26; a disability or sick pay insurance policy you buy to cover employees is an employee benefit program on line 14.
not deductible, not deductible: Time you took off yourself is not an expense at all, because a sole proprietor's own time is never deductible whether worked or not.
Line 23, taxes and licenses: The leave pay is line 26; the employer payroll taxes charged on that same leave pay are taxes and licenses on line 23.

Examples that belong on line 26

$1,850 of vacation pay paid out during the year
$620 of paid sick days taken by two employees
$900 of accrued leave paid out when an employee left
$1,100 of paid holidays for hourly staff
An accrued leave balance of $2,400 not yet paid, with no deduction on a cash-basis return

What does not belong here

Accrued but unpaid leave on a cash-basis return.
A reserve set aside in the books for future vacation pay.
Sick pay funded by an insurer rather than by you.
Your own time off.

The limit that applies

On the cash basis, deductible when paid. Accrued but unpaid leave is not deductible.

What to keep

Keep the payroll register showing the leave hours paid and the pay dates. The accrual schedule in your books is useful management information, but the return follows what was actually paid.

Other expenses on line 26

Expense	Line
an employee bonus	Schedule C, Line 26
an employee's gross wages	Schedule C, Line 26
payments to your spouse	Schedule C, Line 26
wages paid to your own child	Schedule C, Line 26

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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