Updated October 18, 2026. Quick answer: Line 23 is for business taxes and licenses, such as real estate and personal property taxes on business assets and licenses paid to state or local governments. Federal income taxes, including self-employment tax, do not go here. The instructions list what you can and cannot deduct on this line.
S corporation return (Form 1120-S) for 2025, read line by line: Form 1120-S lines 7 to 12.
Partnership return (Form 1065) for 2025, read line by line: Form 1065 lines 11 to 14.
What line 23 asks for
The form’s caption reads “Taxes and licenses”. The instructions say you “can deduct the following taxes and licenses on this line.” The list is below.
- “State and local sales taxes imposed on you as the seller of goods or services.” “If you collected this tax from the buyer, you must also include the amount collected in gross receipts or sales on line 1.”
- “Real estate and personal property taxes on business assets.”
- “Licenses and regulatory fees for your trade or business paid each year to state or local governments.” “But some licenses, such as liquor licenses, may have to be amortized.”
- “Social security and Medicare taxes paid to match required withholding from your employees’ wages.” “Reduce your deduction by the amount shown on Form 8846, line 4.”
- “Federal unemployment tax paid.”
- “Federal highway use tax.”
- “Contributions to a state unemployment insurance fund, or paid family and medical leave program disability benefit fund if they are considered taxes under state law.”
What the instructions keep off line 23
The instructions say “Do not deduct the following.”
- “Federal income taxes, including your” self-employment tax. However, you “can deduct one-half of your” self-employment tax “on Schedule 1 (Form 1040), line 15” (but if filing Form 1040-NR, then only when covered under the U.S. social security system due to an international social security agreement). See the Schedule 1 lines 15 and 16 page.
- “Estate and gift taxes.”
- Taxes “assessed to pay for improvements, such as paving and sewers.”
- Taxes “on your home or personal use property.”
- “State and local sales taxes on property purchased for use in your business. Instead, treat these taxes as part of the cost of the property.”
- “State and local sales taxes imposed on the buyer that you were required to collect and pay over to state or local governments.” “These taxes are not included in gross receipts or sales nor are they a deductible expense.”
- “Other taxes and license fees not related to your business.”
Where the number comes from
The line 23 total comes from your tax bills, license renewals and payroll tax records for the year, limited to the items on the first list above. Payroll tax deposits and returns are covered on the Form 941 page, and amortization of a license is covered in the instructions for Form 4562. The instructions for line 23 refer you there for amortization.
Where it goes next
Each Part II expense line is a step toward the total on line 28. The form describes it as “Total expenses before expenses for business use of home. Add lines 8 through 27b”. Line 29 then reads “Tentative profit or (loss). Subtract line 28 from line 7”. Part II also carries this heading: “Expenses. Enter expenses for business use of your home only on line 30.” Lines 28 and 29 are explained on the Schedule C lines 27a to 29 page and line 30 on the Schedule C line 30 page. Self-employment tax itself is explained on the Schedule 2 line 4 page. The overall form is explained on the Schedule C (Form 1040) page, and the return it attaches to is the Form 1040.
Edition and line numbers
This page reads the 2025 Schedule C (Form 1040) and its 2025 instructions, the current files irs.gov served on 2026-10-18. They are the files for the tax year 2025 return, filed in 2026. The schedule’s heading says “Attach to Form 1040, 1040-SR, 1040-SS, 1040-NR, or 1041”. Check the tax year printed on the schedule you are filling in and use the line numbers on that year’s schedule, because a different year’s schedule can number or word its lines differently.
Common mistakes
- Deducting self-employment tax on line 23. The instructions list under what not to deduct “Federal income taxes, including your” self-employment tax.
- Deducting sales tax paid on equipment. The instructions say “treat these taxes as part of the cost of the property.”
- Deducting property tax on your home. The instructions say not to deduct taxes “on your home or personal use property.”
Related: Schedule C (Form 1040), Schedule 2 line 4, Form 4562, and Form 941.
Sources
- Instructions for Schedule C (Form 1040), Profit or Loss From Business (2025): https://www.irs.gov/pub/irs-pdf/i1040sc.pdf
- Schedule C (Form 1040), Profit or Loss From Business (2025): https://www.irs.gov/pub/irs-pdf/f1040sc.pdf
Read from the IRS documents linked above on October 18, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.