[wjun15]

Are taxes deductible on the Schedule C? Becker says:

“State and Local Tax Expenses are reported as an itemized deduction of Schedule A”

but on one of hte sim problems it says that real estate taxes related to the business are deducted on schedule C. I also see “Taxes and licenses” section in line 23 of Schedule C. Just a little confused here, can someone explain?

Thanks!

[M.O.D.]

And individual uses schedule A

An individual with a business uses Schedule C for the business portion of expenses (which include taxes) and schedule A for his personal deductions.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[musicamor]

M.O.D., I would caution against a generalized response such as the one you provided. For example, an individual could file schedule A and Schedule C in the same tax return – remember the Sole Proprietors are considered individuals from the IRS' perspective.

Wjun15:

State and local taxes are deductible on both schedules A and C – depending upon the underlying nature of the transactions, they would be categorized as either business-related or personal and scheduled out on the tax return accordingly. The differentiating factor here is the questionnaire's use of the “business connection.”

Texas CPA - licensed in 2012!!!

[WeWillSee]

Schedule C net income is taxed as self-employment income to the taxpayer. So the taxpayer will deduct taxes as if they had a W-2, the only difference is in addition to the Sch A state tax deduction, the taxpayer would also get a deduction for AGI on pg 1 of their 1040 for the employer portion of self employment taxes paid.

“State and Local Tax Expenses are reported as an itemized deduction of Schedule A” – They are referring to state income taxes.

Taxes not based on income i.e.real estate taxes can be allocated as a deduction on Sch C – so you can expense the portion related to the business.

Line 23 on Sch C “Taxes and Licenses” may be used for something like sales tax paid

I passed REG over a year ago – but I am a tax preparer, so hopefully this helped!

[Author]

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