Schedule C: where to deduct service fees on income?
"Putting them on line 10 is best suited for your situation. According to Quickbooks:  Commissions and Fees (Line 10) Commissions/fees paid to nonemployees to generate revenue (e.g. agent   fees). It seems like this website you are using falls under the term ""nonemployees""."
I must say that this is a question that you should hire a professional tax adviser (EA/CPA licensed in your State) to answer. It is way above our amateurs' pay-grade. That said, I'll tell you what I personally think on the issue. I'm not a licensed tax adviser, and nothing that I write here can be used in any way as a justification for any action. Read the full disclaimer in my profile. I believe you're right to treat those as assets. You bought them as an investment, and you intend to sell them for profit. Here the good news for you end. As we decided to define the domains as an asset, we need to decide what type of asset it is. I believe you're holding a Sec. 197 asset. This is because domain is essentially akin to franchise and trademark, and as such falls under the Sec. 197 definition. That means that your amortization period is 15 years. Your expenses related to these domains should also be amortized, on the same schedule. When you sell a domain, you can deduct the portion that you have not yet deducted from the amortization schedule from your proceeds. Keep in mind passive loss limitations, since losses from assets held as investment cannot offset Schedule C income. "Keep in mind that all of the information below assumes: That being said, here are some examples of national tax laws relating to barter transactions. Obviously this isn't an exhaustive list, but based on my grossly non-representative sample, I think it's fairly safe to assume that barter transactions are more likely taxable than not.  You're referring to a barter system; in the United States, the IRS is very specific about this (see the section titled Bartering).  Bartering is an exchange of property or services. The fair market   value of goods and services exchanged is fully taxable and must be   included on Form 1040 in the income of both parties. The IRS also provides more details: Bartering occurs when you exchange goods or services without   exchanging money. An example of bartering is a plumber doing repair   work for a dentist in exchange for dental services. You must include   in gross income in the year of receipt the fair market value of goods   and services received in exchange for goods or services you provide or   may provide under the bartering arrangement. Generally, you report this income on Form 1040, Schedule C (PDF),   Profit or Loss from Business or Form 1040, Schedule C-EZ (PDF), Net   Profit from Business. If you failed to report this income, correct   your return by filing a Form 1040X (PDF). Refer to Topic 308 for   amended return information. So yes, the net value of bartered goods or services is most likely taxable. According to the Australian Tax Office: Barter transactions are assessable and deductible for income tax   purposes to the same extent as other cash or credit transactions. Her Majesty's Revenue and Customs states that: If you supply services or goods (new or second-hand) and receive other   goods or services in payment, there are two separate supplies: You must account for VAT, and so must your customer if they're   VAT-registered. The VAT treatment is the same as for part-exchanges.   You must both account for VAT on the amounts you would each have paid   for the goods or services if there had been no barter and they had   been paid for with money. Searching the website of the Federal Tax Service for the Russian/Cryllic word for barter (бартер) doesn't yield any results, but that might be because even between Google Translate and the rest of the internet, I don't speak Russian. That being said, I did manage to find this (translated from the first full paragraph of the Russian, beginning with ""Налог на доходы..."": The tax on personal income is paid by citizens of the Russian   Federation with all types of income received by them in the calendar   year, either in cash or in kind. Since bartering would probably qualify as an in kind transaction, it would likely be taxable.  The South African Revenue Service includes barter transactions in the supply of goods taxed under the VAT.  The term “supply” is defined very broadly and includes all forms of   supply and any derivative of the term, irrespective of where the   supply is effected. The term includes performance in terms of a sale,   rental agreement, instalment credit agreement or barter transaction. Look for section 3.6, Supply and Taxable Supply, found on p17 of the current version of the linked document." "If this is truly hobby income (you do not intend to operate as a business and don't have a profit motive) then report the income on Line 21 (""other income"") of form 1040.  If this is a business, then the income and expenses belong on a Schedule C to form 1040. The distinction is in the treatment of profits and losses - your net profits on a business are subject to self-employment tax, while hobby income is not. Net losses on a business are deductible against other income; net losses on a hobby are miscellaneous itemized deductions in the ""2%"" box on Schedule A.  From a tax point of view, selling apps and accepting donations are different. Arguably, donations are gifts; gifts are not taxable income.  The hobby/business and income/gift distinctions are tricky. If the dollar amounts are small, nobody (including the IRS) really cares. If you start making or losing a lot of money, you'll want to get a good tax person lined up who can help you decide how to characterize these items of income and expens, how to put them on your return, and how to defend the return on audit if necessary." "If something is tax-deductible in the US, it means that, in the eyes of the Internal Revenue Service, you effectively didn't earn that money.  Within restrictions, your adjusted gross income, which is the income that your tax is calculated on, is reduced by the amount of your tax deductions.  In the case of the ASPCA, they've jumped through the appropriate hoops to become a 501(c)(3) organization, which, among other things, means that donations to them are tax-deductible by the donor (a) if they itemize, and (b) if they haven't reached a donation cap.  That's the carrot that encourages donations to these organizations.  There are restrictions, meaning that there can be only certain types of privileges or exchange between the donor and the organization.  Essentially, it has to be a donation, and not a purchase of substantial goods or services.  Your donation to these kinds of organizations doesn't hurt their funding elsewhere, or shouldn't. As mentioned above, if you don't itemize your deductions, you won't gain any extra tax savings from the donation.  (You shouldn't itemize if you're better off taking the standard deduction.)  Having said that, though, please give whatever you're led to give, after considering all of the ramifications (financial and spiritual).  The tax deduction is only a subsidy; the IRS doesn't ""pick up the whole tab"" but only refunds a fraction to you in the form of tax savings through itemized deductions.  If you don't feel you have the money, then donate your time.  It might be more needed anyway!" You can use the ITR 1 and declare the income from freelancing as income from other sources. As part of freelancing, certain expenses can be deducted provided they are directly related to work and have proper records. Please consult a CA who can advice you on how to do this. The Actual income shown should be less of the expenses. It actually depends on the services provided. If you're renting through AirBnB, you're likely to provide much more services to the tenants than a traditional rental. It may raise it to a level when it is no longer a passive activity. See here, for starters: Providing substantial services.   If you provide substantial services   that are primarily for your tenant's convenience, such as regular   cleaning, changing linen, or maid service, you report your rental   income and expenses on Schedule C (Form 1040), Profit or Loss From   Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Use   Form 1065, U.S. Return of Partnership Income, if your rental activity   is a partnership (including a partnership with your spouse unless it   is a qualified joint venture). Substantial services do not include the   furnishing of heat and light, cleaning of public areas, trash   collection, etc. For information, see Publication 334, Tax Guide for   Small Business. Also, you may have to pay self-employment tax on your   rental income using Schedule SE (Form 1040), Self-Employment Tax. For   a discussion of “substantial services,” see Real Estate Rents in   Publication 334, chapter 5 You are right that even if you do not receive a 1099-MISC, you still need to report all income to the IRS.  Report the $40 on Schedule C or Schedule C-EZ.  Since your net profit was less than $400, you do not need to file Schedule SE.  From the IRS web site: Self-Employment Income It is a common misconception that if a taxpayer does not receive a Form 1099-MISC or if the income is under $600 per payer, the income is not taxable. There is no minimum amount that a taxpayer may exclude from gross income. All income earned through the taxpayer’s business, as an independent contractor or from informal side jobs is self-employment income, which is fully taxable and must be reported on Form 1040. Use Form 1040, Schedule C, Profit or Loss from Business, or Form 1040, Schedule C-EZ, Net Profit from Business (Sole Proprietorship) to report income and expenses. Taxpayers will also need to prepare Form 1040 Schedule SE for self-employment taxes if the net profit exceeds $400 for a year. Do not report this income on Form 1040 Line 21 as Other Income. Independent contractors must report all income as taxable, even if it is less than $600. Even if the client does not issue a Form 1099-MISC, the income, whatever the amount, is still reportable by the taxpayer. "No, not on schedule C, better. Its an ""above the line"" deduction (line 29 on your 1040). Here's the turbo tax article on it. The instructions for this line set certain limitations that you must take into the account, and yes - it is limited to the net profit from the business. One of the following statements must be true. You were self-employed and had a net profit for the year. You were a partner with net earnings from self-employment. You used one of the optional methods to figure your net earnings from self-employment on Schedule SE. You received wages in 2011 from an S corporation in which you were a more-than-2% shareholder. Health insurance premiums paid or   reimbursed by the S corporation are shown as wages on Form W-2. The insurance plan must be established under your business. Your   personal services must have been a material income-producing factor in   the business. If you are filing Schedule C, C-EZ, or F, the policy can   be either in your name or in the name of the business."