What this line means
The cost of supplies used in your business that are not office supplies (line 18) and are not materials included in cost of goods sold (Part III). This covers items consumed in providing your services — cleaning supplies for a janitorial business, art supplies for an artist who does commissions, disposable gloves for a salon, tools under the de minimis threshold. If the item becomes part of a product you sell, it belongs in cost of goods sold, not here.
Does this apply to you?
- You buy materials consumed in providing services — cleaning products, art supplies, beauty supplies
- You purchase small tools and equipment that are consumed or wear out within the year
- You buy safety supplies — gloves, masks, first aid kits — for your business
- You purchase non-office consumables specific to your trade or profession
Easy to overlook
De minimis safe harbor for small-dollar items The IRS de minimis safe harbor lets you deduct items costing $2,500 or less per invoice (or per item) as supplies or expenses rather than capitalizing and depreciating them. 1 A $2,000 power tool can be expensed immediately under this rule if you make the election. Without the election, you would need to depreciate it on line 13. Businesses with audited financial statements can use a higher $5,000 threshold, but most sole proprietors use the $2,500 limit. IRS Schedule C instructions — Line 22
Supplies vs. cost of goods sold If you make products, materials that become part of the finished product go in cost of goods sold (Part III), not on line 22. Paint for a house painter is a supply (consumed in providing a service). Paint for someone who makes and sells painted furniture is part of cost of goods sold (it becomes part of the product). The distinction depends on whether you are a service business or a product business. 2 General filing pattern — supplies vs. cost of goods sold confusion
Watch out for this
Putting materials that should be in cost of goods sold on line 22, or vice versa. If you sell physical products, the raw materials that go into those products belong in Part III (cost of goods sold), not on line 22. Miscategorizing these does not change your total deduction, but it misrepresents your gross margin and can trigger IRS questions.
Footnotes
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IRS Schedule C (Form 1040) Instructions, Line 22. https://www.irs.gov/instructions/i1040sc ↩
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IRS Publication 334, Tax Guide for Small Business. https://www.irs.gov/pub/irs-pdf/p334.pdf ↩