Commissions & Fees
Paying for performance? Whether it's sales commissions, referral fees, or broker fees, Line 10 is where you deduct the cost of acquiring revenue.
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What Goes on Line 10?
Schedule C Line 10 ("Commissions and fees") is specifically for amounts paid to non-employees for services that help you generate sales or business. Think of Line 10 as "Success Fees." Unlike hourly labor (which typically goes on Line 11) or professional services (Line 17), commissions are usually tied to a specific result: a sale, a closed deal, or a new client.
YES: Deductible Here
- Sales Commissions: Paid to independent reps (1099 contractors) who sell your product.
- Referral Fees: "Bird dog" fees paid to someone for sending you a lead that closes.
- Listing/Broker Fees: Percentage fees paid to platforms (eBay, Etsy, Upwork) or real estate brokers.
- Affiliate Payouts: Payments to influencers or affiliates who promote your brand for a cut of sales.
NO: Do Not List Here
- Employee Commissions: If you pay a W-2 staff member a bonus or commission, it goes on Line 26 (Wages).
- Payments to Yourself: You cannot deduct commissions paid to yourself. That is just profit distribution.
- Real Estate Closing Costs: Commissions paid to buy a building are added to the building's basis, not expensed immediately.
The 1099-NEC Trap
The biggest audit risk with Line 10 is failing to file Form 1099-NEC.
Exception: You generally do not need to send 1099s to C-Corps or S-Corps, or for payments made via Credit Card/PayPal (the payment processor handles those). But when in doubt, send it.
Strategic Use of Commissions
Using commissions effectively can align your team's incentives with your business growth while providing tax deductions.
The "Bird Dog" Strategy
In industries like Real Estate or Wholesaling, you can pay "Bird Dogs" (scouts) a finder's fee for bringing you deals. This is fully deductible on Line 10. Just make sure you get a W-9 form from them before you cut the check.
Affiliate Marketing Scaling
Instead of paying for ads (Line 8), you can pay affiliates a commission only on closed sales (Line 10). This shifts your risk. Documentation is easy here because most affiliate platforms generate the tax forms automatically.
Year-End Planning
If you use the Cash Method of accounting, you can pay accrued commissions in late December to lock in the deduction for the current year, even if the sales rep doesn't cash the check until January.
Audit Defense Checklist
Frequently Asked Questions
Back to Schedule C Hub · See also Line 11: Contract Labor
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Disclaimer: This content is educational and does not constitute individualized tax advice. Tax rules change; verify all figures with a qualified CPA before filing. For personalized guidance, book a consultation.