Ask an Accountant

A free tool by

Question
Hello, I am a W-2 employee but want to start a sole propriater (Schedule-C) business on the side. Does the standard deduction only apply to one of those incomes or is it split between them? Thank you
AI accountant’s answer:

Great question! Deductions confuse most people. The short answer: It applies to both. Your W-2 income and Schedule C income are added together on line 9 of your 1040 resulting in your “total income” for the year. Your total income is reduced by your standard deduction, and income tax is calculated on the remainder.

However, as a soon-to-be sole proprietor, there are more deductions you can take than just the standard deduction!

On your Schedule C, you’re able to reduce your business income with business expenses which will bring your taxable income down (resulting in less tax overall).

No answer given yet!

Answer

Great question! Deductions confuse most people. The short answer: It applies to both. Your W-2 income and Schedule C income are added together on line 9 of your 1040 resulting in your “total income” for the year. Your total income is reduced by your standard deduction, and income tax is calculated on the remainder.

However, as a soon-to-be sole proprietor, there are more deductions you can take than just the standard deduction!

On your Schedule C, you’re able to reduce your business income with business expenses which will bring your taxable income down (resulting in less tax overall).

No answer given yet!

Keeper Staff

Keeper is a delightfully smart tax filing software that's especially useful for people with 1099 contracting and freelance income. Our blog breaks down IRS guidance with real-world examples and analysis by tax professionals — empowering taxpayers to save money and take control of their finances.

Followup question? Ask away.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Got a different question? Ask our accountants.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Estimate tax saving

Track and claim every eligible deduction with Keeper

Keeper is the top-rated all-in-one business expense tracker, tax filing service, and personal accountant.