Updated November 7, 2026. Quick answer: Money you take out of a sole proprietorship for yourself is an owner draw. It is not a business expense, it does not reduce profit, and it does not appear on Schedule C, but you should record every one, because Publication 583 tells the owner to write checks payable to himself or herself only for personal withdrawals and to record them even though they cannot be deducted.
On records for a one-person business: a separate business bank account and reconciling a bank statement to your books.
A draw is a personal withdrawal
This page reads the primary sources linked under Sources, as retrieved on November 6 and 7, 2026. Publication 583 is the December 2024 revision.
Section 262 sets the principle: “no deduction shall be allowed for personal, living, or family expenses.” Publication 583 applies it to the owner’s own account: “Write checks payable to yourself only when making withdrawals from your business for personal use.” A sole proprietor has no payroll for himself or herself, so there is no wage to deduct; this page’s reading is that the draw is the owner taking out profit already earned, not a cost of earning it.
Record it even though it is not deductible
Publication 583 uses a worked example. Its sole proprietor “does not pay personal or nonbusiness expenses by checks drawn on the business account. If he did, he would record them in the journal, even though he could not deduct them as business expenses.” The check disbursements journal in that publication even has a column named Drawing. The rule for the account is stated directly: “Use the business account for business purposes only.” A draw is therefore best made as a transfer from the business account to your personal account, with a clear note, not as a card payment of a personal bill.
What to record for each draw
A short table is enough:
| Field | What to write | Source |
|---|---|---|
| Date | The date of the transfer | Bank statement |
| Amount | The amount moved | Bank statement |
| Where it went | Your personal account, or a named personal payment | Statement or transfer confirmation |
| Coding | Owner draw, not an expense | Your ledger |
| Running total | Year-to-date draws against year-to-date profit | Ledger summary |
Draws and your taxes
Your tax follows profit, not what you took out. The Schedule C instructions for the wages line say: “Do not include salaries and wages deducted elsewhere on your return or amounts paid to yourself.” Profit is receipts less expenses, and nothing you pay yourself is in the expenses. A year of high profit and low draws still produces a tax bill that has to be paid from somewhere, and the estimated payments should come from profit, not from the draw. Planning for that is covered on quarterly estimated taxes for the first year, and the self-employment tax is on self-employment tax.
How long to keep it
Keep the draw records with the year’s other records. The IRS default is: “Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.” The listed situations can lengthen it; see Bookkeeping for a One-Person Business.
Mixed accounts
If you paid a personal bill from the business account, or a business bill from a personal card, the fix is a ledger entry, not a lump adjustment at filing time. Publication 583’s advice is to separate the accounts: “You should keep your business account separate from your personal checking account.” Reimbursing yourself for business costs you paid personally is an expense you record with the receipt; see IRS receipt rules for business expenses.
Common mistakes
- Deducting the draw as wages to yourself. A sole proprietor’s draw is not an expense.
- Paying personal bills from the business account with no record.
- Sizing estimated tax payments from the draws instead of the profit.
- Forgetting a draw in the ledger. The business bank balance then no longer ties to the books.
Related: Bookkeeping for a One-Person Business, quarterly estimated taxes, and Receipts and Expense Records for a One-Person Business.
Sources
- IRS Publication 583 (Rev. December 2024), Starting a Business and Keeping Records
- 26 U.S.C. 262, Personal, living, and family expenses (Cornell LII)
- Instructions for Schedule C (Form 1040) (2025)
- IRS, How long should I keep records
Read from the IRS documents linked above on November 7, 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.