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). Use the Keeper Tax ap to identify all your eligible write-offs!
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Sarah is an Enrolled Agent with the IRS and has 6 years of tax and accounting experience. She's an avid hiker, animal lover, and self-proclaimed chocolate connoisseur.