Updated October 24, 2026. Quick answer: Line 4 of the Pennsylvania Form PA-40 is where you report net income or loss from a business, profession or farm. It is for anyone with self-employment, farm, short-term rental or pass-through business income, reported from PA Schedules C and F rather than the federal ones. A positive amount is added into the line 9 total, and a loss is not.
What this line does
Line 4 on the form reads “Net Income or Loss from the Operation of a Business, Profession, or Farm.”. The booklet’s instruction heading is “LINE 4. NET INCOME OR LOSS FROM THE OPERATION OF A BUSINESS, PROFESSION, OR FARM”. The line sits on the first page of the PA-40 (marked Side 1), and it has a loss oval next to it.
This page covers line 4. For the federal schedule that most self-employed filers also complete, see Schedule C, and for the full run of lines see Pennsylvania Form PA-40 line by line.
Who it applies to
The booklet speaks to anyone with business activity: “Report all income (loss) from business, farm, short-term rentals of less than 30 days, and business activity from partnership and PA S corporation schedules.”
It also marks who must use which schedule: “You must use PA Schedule C to report income and expenses from a business or profession or PA Schedule F to report income expenses for a farm.” The federal side of business gains, rental and farm income is covered on Schedule 1 lines 3 to 6.
What the instructions say
The booklet’s text for line 4 is on pages 15 to 17. Each sentence is printed below as the booklet gives it.
| Line | What the form says |
|---|---|
| Form label | “Net Income or Loss from the Operation of a Business, Profession, or Farm.” |
| Line 4 | “Report all income (loss) from business, farm, short-term rentals of less than 30 days, and business activity from partnership and PA S corporation schedules.” |
| A net loss | “If reporting a total net loss, fill in the oval next to Line 4 on your PA-40.” |
| Where losses may be reported | “Under PA law, losses may only be reported on Lines 4, 5, and 6.” |
| How to figure it | “For PA purposes, determine net income (loss) under accepted principles and practices of the accounting profession.” |
| Business or profession | “Report your net income (loss) from an unincorporated business or profession on PA Schedule C.” |
| Schedules C and F | “File a PA Schedule C or a PA Schedule F using your separate books and records for PA purposes.” |
| Not the federal schedules | “You must use PA Schedule C to report income and expenses from a business or profession or PA Schedule F to report income expenses for a farm.” “Do not use federal Schedules C or F.” |
| Adjusting federal amounts | “Generally, you must adjust your federal amounts for PA tax purposes.” “These adjustments can increase or decrease your PA-taxable income (loss).” “You must maintain appropriate records of such adjustments.” |
| Expenses in this class | “you may deduct ordinary and necessary expenses paid or accrued during the taxable year in their production.” |
| Schedules required | “Submit the required Pennsylvania schedule for each amount you report on Lines 4 through 8.” |
| Qualified joint venture | “A taxpayer and the taxpayer’s spouse must each file a separate Schedule C to report their shares of the income from a qualified joint venture.” |
| Partnership and S corporation share | “You report your share of income (loss), whether distributed or not, in the same PA income class in which the entity realized the income (loss).” |
| Rental activity, how to decide | “If in business, report your net profit (loss) on a PA Schedule C.” “If not in the business of rents, report your rental activity on a PA Schedule E on Line 6.” |
| Rental business, first test | “You offer the use of your property with the intention of realizing a profit” |
| Short-term rentals | “Include the net profit (loss) from short-term rentals recorded on PA Schedule E, Line 22, with the net profits (losses) from all other PA Schedules C and/or F and all business income amounts from partnerships, PA S corporations or limited liability companies reporting on PA-20S/PA-65 Schedules RK-1 or NRK-1 or federal Schedules K-1 on Line 4 of your PA-40 return.” |
| Married filers | “If you are married, you and your spouse may file a joint tax return for convenience only.” “PA law does not provide any advantage when filing a joint return.” |
| Both spouses have net income | “If each realizes a net profit, gain, or income, add the net income amounts together and report that total on the appropriate line.” |
| Both spouses have net losses | “If each realizes a net loss, add the net losses and report that total on the appropriate line.” “Fill in the oval next to that line.” |
| One spouse has income, one a loss | “If one spouse has a net profit, income or gain and the other spouse has a net loss, report only the net income on the appropriate line.” “Do not take into account the spouse’s loss.” |
| No carryover | “You cannot carry forward or carry back gains or losses to other tax years.” |
The figures the form prints
The booklet works through a married couple’s line 4. It starts: “Mary and Ben file a joint tax return. Mary owned a flower shop, and realized a net profit of $5,000.” It continues: “Ben was a shareholder in a PA S corporation, and received a PA Schedule RK-1 reporting $35,000 of business income. They jointly owned a small retail store and realized a loss of $8,000.” And it concludes: “They report $32,000 on Line 4 from Mary’s net income of $1,000 ($5,000 less her half of the $8,000 loss), plus Ben’s net income of $31,000 ($35,000 less his half of the $8,000 loss).”
Where the result goes next
A positive line 4 amount is added on line 9, and a loss is not. The form’s line 9 label reads “Total PA Taxable Income. Add only the positive income amounts from Lines 1c, 2, 3, 4, 5, 6, 7, and 8.” It continues with “DO NOT ADD any losses reported on Lines 4, 5, or 6.” For the self-employment tax side of the same income, see Schedule SE and self-employment tax explained.
A worked example
Illustration, not a state example, recomputed from the booklet’s own Mary and Ben figures above: half of the $8,000 loss is $4,000. Mary’s net income is $5,000 minus $4,000. That is $1,000. Ben’s is $35,000 minus $4,000. That is $31,000. Together that is $1,000 plus $31,000. The total is $32,000 and it matches the booklet.
Edition and line numbers
This page reads 2025 PA Personal Income Tax Return Instructions (PA-40 IN), Pennsylvania Department of Revenue, and 2025 Form PA-40, Pennsylvania Income Tax Return, Pennsylvania Department of Revenue, for tax year 2025, the current files the Pennsylvania Department of Revenue served on 2026-10-24. Check the edition printed on your own form and use that edition’s line numbers.
Common mistakes
- Using the federal business schedules. The booklet says “Do not use federal Schedules C or F.”
- Carrying a loss into another year. The booklet says “You cannot carry forward or carry back gains or losses to other tax years.”
- Letting one spouse’s loss reduce the other’s income. The booklet says “Do not take into account the spouse’s loss.”
Related: Schedule C, Schedule 1 lines 3 to 6, Schedule SE, and self-employment tax explained.
Find the right next step for your situation
About how much do you have invested? Pick the range that fits; your next step appears immediately below.
Talk to an advisor about retirement income taxes
For U.S. investors with $250,000 or more in investable assets. WiserAdvisor is an independent service matching you with 2 to 3 vetted advisers. Its form asks for your ZIP code and answers to a few questions; a match is not guaranteed.
Free to request, with no obligation to hire. By submitting, you consent to calls, texts and emails from WiserAdvisor and up to three advisers. Advisers pay for introductions.
Clear Money Guide may earn a referral payment for a qualifying completed form. An introduction is not a Clear Money Guide recommendation.
Opens on WiserAdvisor’s site in a new tab.
Explore advisor help with business income taxes
Price the destination before you decide. The matching service below introduces you to advisers who pay to meet you.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide may earn a referral payment for a qualifying submitted form, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here; you stay on this page.
What happens when you press the button
It asks about nine questions: age, investable assets, location; then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button.
Prefer flat-fee or hourly pricing instead? Compare ranges here.
Answer againSources
- 2025 PA Personal Income Tax Return Instructions (PA-40 IN), Pennsylvania Department of Revenue: www.pa.gov
- 2025 Form PA-40, Pennsylvania Income Tax Return, Pennsylvania Department of Revenue: www.pa.gov
- Related official page (not quoted): Pennsylvania Department of Revenue, personal income tax forms and publications: www.pa.gov
Read from the state revenue documents linked above on October 24, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the state revenue department is the right place to confirm anything consequential.