Question

Where are deductions from a business deducted (reported on Form 1040) by a sole proprietor? Are they for (above the line) or from AGI (below the line)? Where are rental income and deductions reported on the Form 1040?

Answer 1

Answer : -

1) The deduction from a business deducted by sole proprietor is on Schedule C,the profit or loss of a sole proprietor is on line 31 and then transfer to line 12 on Form 1040. The self-employment taxes are on Schedule E.

2) Any business owner can deduct all 'ordinary and necessary' expenses from the income of the business. These expenses are above the line expenses.

3) i) If the rent is received from a real estate property then the taxpayer can fill the Schedule E of form 1040 and if the tax payer provides any service to the tenants then taxpayer has to fill Schedule C of form 1040

ii) If the property is a personal property then taxpayer has to fill Schedule C of form 1040.