Form Pa-40 C - Pa Schedule C - Profit Or Loss From Business Or Profession Page 6
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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 29.
•
Taxes. Deduct tax expenses other than taxes based
Charitable contributions made from your business account
on income. You may not deduct taxes based on net income,
and acknowledged publicly by the recipient. Personal
federal income taxes or the one-half of self-employment taxes
charitable contributions are not allowed.
the IRS allows. Do not deduct taxes paid to other states or
•
Expenses using the capitalization rules established by your
foreign countries based on income. Do not deduct estate,
trade, profession, or industry, under its generally accepted
inheritance, legacy, succession or gift taxes. Assessments for
accounting principles and practices. Once elected, use this
betterments and improvements are not allowed. Business
method consistently.
privilege taxes and/or gross receipts taxes are acceptable
•
deductions.
100 percent of expenses incurred for removing barriers to
individuals with disabilities and the elderly. This is not a
Line 31.
Travel and entertainment. PA law does not follow
credit but a direct expense in arriving at the net income
federal law. Deduct 100 percent of your allowable travel and
or loss.
entertainment expenses. You may never deduct the personal
•
Home office expenses. Pennsylvania generally follows the
portion of your travel and entertainment expenses, whether for
yourself, your spouse, your dependents or any other person.
federal rules for a home office.
•
Any other expenses allowed under generally accepted
Line 32.
Utilities. Certain utilities, which are not subject to
accounting principles or financial accounting standards
sales and use tax when purchased exclusively for residential
board rules but are not allowable or limited under federal
use, become subject to sales and use tax when used for
rules. Itemize these expenses.
commercial purposes. If you are including electricity, natural
gas, fuel oil, or kerosene in your calculation of the business use
Line 38.
Total expenses. Add Lines 6 through 37.
of your home, you should report use tax due on the prorated
expense amount on Line 25 of the PA-40 or on the sales tax
Line 39.
Other business credits. If you claimed one or
returns you file with the department.
more of these credits, reduce total expenses by costs to qualify
for the credit:
Line 33.
Wages. Do not reduce your wage expense for any
•
federal credits you claim. Add back any wage expense excluded
PA Employment Incentive Payments Credit
in order to claim a federal credit. Do not deduct the costs of
•
PA Job Creation Tax Credit
your own participation.
•
PA Research and Development Tax Credit
Line 34.
.
IDCs (1/3 current expensing)
If the business
If you did not claim one of these business credits, enter zero
includes an amount on this line, it elects to directly expense up
on Line 39.
to one-third of the amount of Intangible Drilling and
Development Costs (IDCs) incurred for the tax year for any tax
Line 40.
Total Adjusted Expenses. Reduce Line 38 by
year beginning after December 31, 2013. See the Information
Line 39.
Notice, Personal Income Tax 2013-04 for additional information.
Line 41.
Net profit or loss. Subtract Line 40 from Line 5. In
Line 35.
.
IDCs (amortization)
Report the amortization
calculating net profit or loss from your business or profession,
expense of IDCs incurred for all tax years on this line. IDCs
report your entire loss in this taxable year.
incurred in tax years beginning prior to January 1, 2014 must
be amortized over the life of the well. IDCs incurred in tax
Schedule C-1 – Cost of goods sold and/or
years beginning after December 31, 2013 may be amortized
operations
over 10 years (120 months).
Generally, if you engaged in a trade or business in which the
production, purchase or sale of merchandise was an income-
Line 36.
Start-up costs (direct expense). Up to $5,000 of
producing factor, you must consider inventories at the beginning
start-up costs may be directly expensed in the first year in
which the business begins operations for tax years beginning
and end of your tax year.
after December 31, 2013. The department will follow IRC
In determining inventory value, use the cost, lower of cost or
Section 195(b)(1)(A) regarding business start-up costs where
market or other method allowable under generally accepted
expenses over $5,000 must be amortized over 180 months
accounting principles and practices. If you change methods of
and any amount of expenses over $50,000 requires a direct
valuing inventory, restate the value at the beginning of the year
reduction in the direct expense amount. For tax years prior to
based on the changed method, and include an explanation.
January 1, 2104, start-up costs are required to be amortized
There is no provision under PA PIT law similar to IRC Section
over 180 months. Record only the direct expense amount of
481(a) that permits taxpayers to spread the income effect of
start-up costs on Line 36 of PA Schedule C. Report the
amortization of any start-up costs on Line 7 of PA Schedule C.
a change in method over a specified period. PA PIT rules also
do not permit valuing inventory using uniform capitalization
Line 37.
Other expenses. Deduct any other costs of doing
rules under IRC section 263 A (a) and (b) and inventories
business or providing professional services if such costs are
calculated using this method for federal purposes must be
permitted under generally accepted accounting principles and
recalculated for PA PIT purposes.
practices. Itemize the additional expenses you claim, and enter
the total on Line 37, Total other expenses. You may deduct:
Schedule C-2 – Depreciation
•
Complete this schedule if you are using a depreciation method
100 percent of the PA sales tax paid on a depreciable
other than federal depreciation reported on your Federal
business asset. However, on disposition, your Pennsylvania
basis and federal basis for that asset will be different.
Schedule C. See the instructions for Line 13 on Page 3.
PAGE 4
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