Pa Schedule C (Form Pa-40 C) - Profit Or Loss From Business Or Profession Page 5
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6PA Schedule C
Profit or Loss from Business or
Profession (Sole Proprietorship)
PA-40 C (08-14) (FI)
PA DEPARTMENT OF REVENUE
Pennsylvania and federal purposes. If you report a different
For each asset, you must also report straight-line depreciation,
amount for Pennsylvania, submit an explanation.
unless not using an optional accelerated depreciation method.
You need straight-line depreciation to take advantage of
Line 4.
Other income. Enter gross proceeds you may have
Pennsylvania’s Tax Benefit Rule when you sell the asset. See
to report elsewhere on your federal tax return, including but
the PA PIT Guide for the Tax Benefit Rule.
not limited to:
•
PA Law requires that taxpayers use straight-line depreciation
The sale of business assets when you reinvest the proceeds
if an asset’s basis for determining depreciation is different
in business operations;
from its basis for federal income tax purposes.
•
The gain (loss) on replacing business property, including land
Line 13b. Section 179 expense.
or buildings used in operating your business or profession;
PA PIT law limits IRC
and
Section 179 current expensing to the expensing allowed at the
time you placed the asset into service or in effect under the
•
Interest and dividend income from short-term investments
IRC of 1986 as amended to Jan. 1, 1997. The maximum
to generate working capital.
deduction that PA Income Tax law permits under IRC Section
Submit a statement explaining the amount you enter. See the
179 is $25,000. Pennsylvania follows the federal definitions for
PA PIT Guide for an explanation of allocable interest, dividends
listed property.
and gains to business or professions. Include other income you
Line 14.
enter on Line 6, Federal Schedule C, but not refunds of feder-
Dues and publications. You may deduct dues and
al taxes and credits you did not deduct for PA purposes.
publications, but only to the extent directly used for ordinary
business purposes. You must exclude any personal use of such
Part II.
Deductions
expenses.
Use generally accepted accounting principles and practices to
Line 15.
Employee benefit programs other than on Line
maintain your books and records and report your expenses
23. You may not deduct any payments you make for your own
from your business or professional activity. PA law does not
impose dollar or percentage limitations on allowable expenses.
personal coverage. Pennsylvania does not allow any personal
You may deduct 100 percent of the PA allowable business or
expenses on any PA tax return.
professional expenses incurred during the taxable year.
Line 17.
Insurance. You may deduct life insurance on
NOTE:
You may have incurred other expenses for entertainment
yourself or your spouse only if the business is the beneficiary
facilities (boat, resort, ranch, etc.), living accommodations
(not your spouse, other family members or other persons).
(except for employees on business) or vacations for yourself,
The business must use the insurance proceeds to continue
your employees or their families. Reduce your total business
business operations. If deducting insurance premiums, the
expenses in Part II by the total of these personal expenses.
proceeds are business income on Line 4 of Part I.
Generally, you may usually use your Federal Schedule C
Line 18.
Interest on business indebtedness. Deduct
expenses for PA PIT purposes. See the other Pennsylvania and
interest on business debt only. If you personally borrow
federal income tax differences explanation beginning on Page 1
money to acquire a business interest or to improve your
of the instructions for more information.
business, you may not deduct the interest on any PA schedule
or PA tax return.
You may not use federal amounts after making certain elections
to accelerate or defer expenses or spread expenses over more
Line 20.
Legal and professional services. Only deduct
than one taxable year. These instructions explain those expense
those expenses you incur in operating your business or
categories where PA PIT rules and federal rules differ.
profession. You may not deduct any personal expenses. You
Line 7.
may include business accounting and tax return preparation
Amortization. Pennsylvania generally follows feder-
expenses, but not the costs for personal accounting and tax
al rules. You have the option to use any amortization method
returns.
allowable under generally accepted accounting principles and
practices. Include the amortization of any start-up costs in
Line 21.
Management fees. Include any management fees
excess of $5,000 on this line. Do not include the amortization
paid in conjunction with the operation of the business to any
of IDCs on this line.
related or non-related entity.
Line 10.
Car and truck expenses. You may deduct 100
Line 23.
Pension and profit-sharing plans for employees.
percent of your actual vehicle expenses or you may use the
Only deduct those expenses directly related to pension and
federal standard mileage rate. If you use the federal standard
profit-sharing plans for employees. You may not deduct any
mileage rate, you may not deduct any actual operating
pension or profit-sharing expenses for your own personal
expenses, including depreciation and lease costs. Follow the
retirement benefits.
Federal Schedule C rules for these expenses. If you use your
Line 25.
Rent on business property. Only deduct those
car or truck for both business and personal travel, you may
expenditures you incurred in the operation of your business or
only deduct the business portion of your expenses.
profession.
Line 13a.
Regular depreciation. Use any depreciation
Line 27.
Subcontractor fees. Deduct subcontractor fees
method permissible under generally accepted accounting prin-
that were not included in your calculation of cost of labor from
ciples and practices as long as you consistently apply the
Line 3 of Schedule C-1. Also include any fees paid to payees
method.
not included as employees to whom regular wages were paid.
NOTE:
PA PIT law does not permit the bonus depreciation
Line 29.
elections added to the Internal Revenue Code in 2002, 2003,
Taxes. Deduct tax expenses other than taxes based
2008 and 2009.
on income. You may not deduct taxes based on net income,
PAGE 3
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