Business

US Schedule C Tax Form: Income & Expense Guide for Filing in 2026

Colin Young
Colin Young
23.04.26
Read time 3 minutes
This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise US Inc. or its affiliates, and it is not intended as a substitute for obtaining business advice from a Certified Public Accountant (CPA) or tax lawyer

As a self-employed individual in the US, accurately reporting business income and expenses is essential. The Schedule C (Form 1040) is the primary tool for this, but errors can lead to missed deductions or IRS issues, especially when handling international transactions.

This guide explains how to complete your Schedule C, identify deductible expenses, and manage your finances for tax purposes. We also explain how Wise can help simplify the reporting of international income and expenses.

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Table of contents

What is the Schedule C tax form?

Schedule C (Form 1040) is an IRS tax form used to report the income and expenses of a business you operate as a sole proprietor. Your business profit or loss is calculated on this form and then reported on your personal tax return.

If you are a freelancer, an independent contractor, or a single-member LLC, you must file a Schedule C.1 The form is divided into five parts:

  1. Part I: Income (Gross receipts and cost of goods sold)
  2. Part II: Expenses (Operating costs like advertising, rent, and travel)
  3. Part III: Cost of Goods Sold (Inventory-based businesses)
  4. Part IV: Information on Your Vehicle (Mileage and business use)
  5. Part V: Other Expenses (Amortization and miscellaneous costs)

How do I report business income on Schedule C?

First, calculate your total gross receipts. This includes all income from your business activities, such as sales, professional fees, and commissions. You must report all income, even if it is not reported on a Form 1099.

Handling Foreign Currency

If you receive income in a foreign currency, you must convert it to US dollars. You can use:

  • The exchange rate on the day you received the payment.
  • A yearly average exchange rate (if the income was received evenly throughout the year).

multi-currency-cash-flow

Deductible Expenses: 2025–2026 Rates

You can deduct business expenses that are “ordinary and necessary” for your trade.2 For the 2026 filing season (2025 tax year), note these specific figures:

Expense Category2025/2026 Rule
Standard Mileage Rate70 cents per mile for 2025 business use.4
Section 179 DeductionLimit increased to $2.5 million for 2025 equipment purchases.1
Business MealsGenerally 50% deductible for 2025.3
Home Office$5 per square foot (up to 300 sq. ft.) under the simplified method.

Crucial Change: Meal Deductions in 2026

While client business meals remain 50% deductible, a significant change takes effect for the 2026 tax year: Employer-provided meals (office snacks, coffee, and cafeteria food) drop from 50% to 0% deductibility.3 If you are tracking these for 2026, ensure they are categorized separately from travel meals.

How international transactions affect your Schedule C

When you work with foreign clients or vendors, accuracy is paramount:

  • Deductible Fees: Foreign transaction fees charged by traditional banks can be deducted as a business expense.
  • Vendor Payments: If you pay for international software or supplies, keep the conversion record to USD to support the expense deduction.
  • VAT/GST: If you paid foreign taxes on business supplies, these are generally deductible as business expenses.

Wise Business Could Help Your Company Save on Global Payments

What if my business has a loss on Schedule C?

If your business expenses are greater than your income, you have a net loss. This loss can often offset other income (like W-2 wages) on your tax return.

The "At-Risk" Rule: You can generally only deduct a loss up to the amount you are "at-risk" in the business—the money you personally contributed or loans for which you are personally liable.3 For 2025, there is also an Excess Business Loss limitation of $300,000 (or $600,000 for joint returns).

Save Time and Money On Overseas Payments With Wise Business

Wise Business can help you save big time on international payments.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in 40+ currencies.

Signing up to Wise Business allows access to BatchTransfer which you can use to pay up to 1000 invoices in one go. This is perfect for small businesses that are managing a global team, saving a ton of time and hassle when making payments.

Some key features of Wise Business include:

  • Mid-market rate: Get the mid-market exchange rate with no hidden fees on international transfers

  • Global Account: Send money to 140+ countries and hold multiple currencies, all in one place. You can also get major currency account details for a one-off fee to receive overseas payments like a local

  • Access to BatchTransfer: Pay up to 1000 invoices in one click. Save time, money, and stress when you make 1000 payments in one click with BatchTransfer payments. Access to BatchTransfer is free with a Wise Business account

  • Auto-conversions: Don't like the current currency exchange rate? Set your desired rate, and Wise sends the transfer the moment the rate is met

  • Free invoicing tool: Generate and send professional invoices

  • No minimum balance requirements or monthly fees: US-based businesses can open an account for free. Learn more about fees here

Use Wise Business >>

BatchTransfer

Final Thoughts

An accurate Schedule C is the foundation of a healthy startup. By using the 70 cents/mile rate for your 2025 travel and staying mindful of the 2026 meal deduction changes, you ensure compliance and maximize your savings.

Using tools like Wise Business alongside your accounting software ensures that international transactions don't become a "tax-time headache," giving you the clarity needed to file with confidence and keep your business growing.

Sources:

  1. Instructions for Schedule C (Form 1040) (2025) | IRS
  2. Publication 334 (2025), Tax Guide for Small Business | IRS
  3. New and enhanced deductions for individuals | IRS
  4. Standard mileage rates for 2025 | IRS

*Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.

This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.

We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.

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