Form Pa-40 C - Pa Schedule C - Profit Or Loss From Business Or Profession (Sole Proprietorship) Page 5
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6PA Schedule C
Profit or Loss from Business or
Profession (Sole Proprietorship)
PA-40 C (09–13) (FI)
PA DEPARTMENT OF REVENUE
Land and Buildings.
federal standard mileage rate. If you use the federal standard
For PA purposes, you may not include
mileage rate, you may not deduct any actual operating
the sales of land and buildings on PA Schedule C unless the
expenses, including depreciation and lease costs. Follow the
property sold is replaced. When the property sold is not
Federal Schedule C rules for these expenses. If you use your
replaced, the department deems such sales as dispositions of
car or truck for both business and personal travel, you may
a segment of a business to be reflected on PA Schedule D.
only deduct the business portion of your expenses.
Line 1b.
Returns and allowances. This amount is the same
Line 13a.
Regular depreciation. Use any depreciation
for both Pennsylvania and federal purposes. If you report a
method permissible under generally accepted accounting prin-
different amount for Pennsylvania, submit an explanation.
ciples and practices as long as you consistently apply the
Line 2.
Cost of goods sold. This amount is the same for
method.
Pennsylvania and federal purposes. If you report a different
NOTE:
PA PIT law does not permit the bonus depreciation
amount for Pennsylvania, submit an explanation.
elections added to the Internal Revenue Code in 2002, 2003,
Line 4.
Other income. Enter gross proceeds you may have
2008 and 2009.
to report elsewhere on your federal tax return, including but
For each asset, you must also report straight-line depreciation,
not limited to:
unless not using an optional accelerated depreciation method.
•
The sale of business assets when you reinvest the proceeds
You need straight-line depreciation to take advantage of
in business operations;
Pennsylvania’s Tax Benefit Rule when you sell the asset. See
•
The gain (loss) on replacing business property, including land
the PA PIT Guide for the Tax Benefit Rule.
or buildings used in operating your business or profession;
PA Law requires that taxpayers use straight-line depreciation
and
if an asset’s basis for determining depreciation is different
•
Interest and dividend income from short-term investments
from its basis for federal income tax purposes.
to generate working capital.
Line 13b. Section 179 expense.
PA PIT law limits IRC
Submit a statement explaining the amount you enter. See the
Section 179 current expensing to the expensing allowed at the
PA PIT Guide for an explanation of allocable interest, dividends
time you placed the asset into service or in effect under the
and gains to business or professions. Include other income
IRC of 1986 as amended to Jan. 1, 1997. The maximum
you enter on Line 6, Federal Schedule C, but not refunds of
deduction that PA Income Tax law permits under IRC Section
federal taxes and credits you did not deduct for PA purposes.
179 is $25,000. Pennsylvania follows the federal definitions for
Part II.
Deductions
listed property.
Use generally accepted accounting principles and practices to
Line 14.
Dues and publications. You may deduct dues and
maintain your books and records and report your expenses
publications, but only to the extent directly used for ordinary
from your business or professional activity. PA law does not
business purposes. You must exclude any personal use of such
impose dollar or percentage limitations on allowable expenses.
expenses.
You may deduct 100 percent of the PA allowable business or
Line 15.
Employee benefit programs other than on Line
professional expenses incurred during the taxable year.
23. You may not deduct any payments you make for your own
NOTE:
You may have incurred other expenses for entertainment
personal coverage. Pennsylvania does not allow any personal
facilities (boat, resort, ranch, etc.), living accommodations
expenses on any PA tax return.
(except for employees on business) or vacations for yourself,
Line 17.
Insurance. You may deduct life insurance on
your employees or their families. Reduce your total business
yourself or your spouse only if the business is the beneficiary
expenses in Part II by the total of these personal expenses.
(not your spouse, other family members or other persons).
Generally, you may usually use your Federal Schedule C
The business must use the insurance proceeds to continue
expenses for PA PIT purposes. See the other Pennsylvania and
business operations. If deducting insurance premiums, the
federal income tax differences explanation beginning on Page 1
proceeds are business income on Line 4 of Part I.
of the instructions for more information.
Line 18.
Interest on business indebtedness. Deduct
You may not use federal amounts after making certain elections
interest on business debt only. If you personally borrow
to accelerate or defer expenses or spread expenses over more
money to acquire a business interest or to improve your
than one taxable year. These instructions explain those expense
business, you may not deduct the interest on any PA schedule
categories where PA PIT rules and federal rules differ.
or PA tax return.
Line 7.
Amortization. Pennsylvania generally follows feder-
Line 20.
Legal and professional services. Only deduct
al rules. You have the option to use any amortization method
those expenses you incur in operating your business or
allowable under generally accepted accounting principles and
profession. You may not deduct any personal expenses. You
practices.
may include business accounting and tax return preparation
Line 10.
Car and truck expenses. You may deduct 100
expenses, but not the costs for personal accounting and tax
percent of your actual vehicle expenses or you may use the
returns.
PAGE 3
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