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