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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
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.

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