U.S. · Tax forms
Schedule C line 23, taxes and licenses.
The IRS list of what belongs here, and the list of what does not.
Line 23 takes business taxes and license fees: seller’s state and local sales taxes, real estate and personal property taxes on business assets, annual business license fees, payroll taxes you pay as an employer and federal highway use tax. It does not take federal income tax or your own self-employment tax.
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Result
What the 2025 instructions say belongs on line 23
| Item | Meaning | What the IRS says |
|---|---|---|
| Deduct: Sales taxes imposed on you as the seller | Deductible on line 23 | If you collected the tax from the buyer, also include the amount collected in gross receipts or sales on line 1 |
| Deduct: Real estate and personal property taxes on business assets | Deductible on line 23 | Listed in the instructions |
| Deduct: Licenses and regulatory fees for your trade or business paid each year to state or local governments | Deductible on line 23 | Some licenses, such as liquor licenses, may have to be amortized; see the Instructions for Form 4562 |
| Deduct: Employer Social Security and Medicare taxes matching employee withholding | Deductible on line 23 | Reduce your deduction by the amount shown on Form 8846, line 4 |
| Deduct: Federal unemployment tax; federal highway use tax | Deductible on line 23 | Listed in the instructions |
| Do not deduct: Federal income taxes, including self-employment tax | Not deductible on line 23 | You can deduct one-half of self-employment tax on Schedule 1 (Form 1040), line 15 |
| Do not deduct: Taxes on your home or personal property; estate and gift taxes; improvement assessments | Not deductible on line 23 | Such as paving and sewers |
| Do not deduct: Sales tax paid on property you buy for the business | Not deductible on line 23 | Treat it as part of the cost of the property instead |
| Do not deduct: Buyer-imposed sales taxes you collect and remit | Not deductible on line 23 | Not part of gross receipts and not an expense |
Sales tax you collect from customers
There are two directions. Sales taxes imposed on you as the seller can be deducted on line 23, and if you collected that tax from the buyer you must also include the amount collected in gross receipts on line 1. Sales taxes imposed on the buyer that you are required to collect and pay over are not included in gross receipts and are not deductible. If the state lets you keep part of the sales tax you collected, include that part as income on line 6.
Employment-related items
Contributions to a state unemployment insurance fund, or a paid family and medical leave program disability benefit fund, are deductible here if they are considered taxes under state law. Employer payroll-related lines are separate from your own self-employment tax, which is figured on Schedule SE.
Why self-employment tax is excluded
The instructions say not to deduct federal income taxes, including your self-employment tax. The deduction the law gives you is one-half of the self-employment tax, taken on Schedule 1, line 15.
Worked example
Elena runs a small shop. She paid a $150 annual city business license, $1,200 of employer Social Security and Medicare tax for her part-time employee and $320 of real estate tax on a storage building the business owns. Those total $1,670 for line 23. Her own self-employment tax is not included; half of it is deducted on Schedule 1, line 15. Names and figures are made up.
More line pages in this set
Related lines: Schedule C Line 22, Schedule C Line 18, Schedule C Line 29.
Sources
- Instructions for Schedule C (Form 1040) (2025): the line-by-line instructions on this page. Page last reviewed or updated April 30, 2026. Read November 2, 2026.
- Schedule C (Form 1040): the printed line wording and arithmetic on the form. Read November 2, 2026.
Tax year 2025 instructions (page last reviewed or updated April 30, 2026). The line labels were read from the Schedule C (Form 1040) PDF the IRS had posted on the date read, which is marked 2026; line numbers can shift between years, so check them against the form for your tax year. Names in worked examples are made up.
Frequently asked questions
What is deductible on Schedule C line 23?
Seller-imposed state and local sales taxes, real estate and personal property taxes on business assets, annual business licenses and regulatory fees, employer Social Security and Medicare tax, federal unemployment tax, federal highway use tax, and certain state unemployment or paid leave fund contributions treated as taxes.
Can I deduct my self-employment tax on line 23?
No. You can deduct one-half of it on Schedule 1 (Form 1040), line 15.
Is sales tax on business purchases deductible on line 23?
No. Treat sales tax on property purchased for the business as part of the cost of the property.
What about sales tax I collect from customers?
If it is imposed on the buyer and you only collect and remit it, it is neither income nor expense. If it is imposed on you as the seller and you collected it, it is deductible on line 23 and also included in gross receipts on line 1.
Are property taxes on my home deductible here?
No. The instructions say taxes on your home or personal use property are not deductible on this line.
Not tax advice
This page summarizes IRS instructions, mostly written for the people who prepare the form, and is not tax, legal or financial advice. A CPA or an enrolled agent can confirm what a line means for your return. Everything runs in your browser; nothing you enter is sent anywhere.