! income not subject — Instruction 1040 (Schedule C)

CAUTION Schedule E (Form 1040). See Qualified Joint Venture ,

earlier, and the Instructions for Schedule E (Form 1040).

Name, image, likeness (NIL) income. If you are a student-athlete, any monetary or financial gain, including non-cash compensation like merchandise or gift cards, you receive from a transaction in which you benefit from the use of your name, image, or likeness is NIL income. Generally, student-athletes are considered independent contractors for tax purposes and report NIL income and related expenses as self-employment income on Schedule C. However, report royalties and other NIL income that is not self-employment income on Schedule E instead.

Medicaid waiver payments. If you are a sole proprietor in a business of providing home care services, certain Medicaid waiver payments you receive may be nontaxable. If you receive Medicaid waiver payments on a Form 1099-MISC or Form 1099-NEC that are excludable from gross income under Notice 2014-7, report the full amount of the payments as income on Schedule C, line 1. Then report the nontaxable and excludable amount as an expense in Part V, Other Expenses, and write “Notice 2014-7” next to the amount. These payments are nontaxable and excludable from income. Notice 2014-7 is available at IRS.gov/irb/2014-04_IRB#NOT-2014-7 . For more information about these payments see the related questions and answers at Certain Medicaid Waiver Payments May Be Excludable From Income, available at IRS.gov/individuals/ certain-medicaid-waiver-payments-may-be-excludable-from- income

Installment sales. Generally, the installment method can’t be used to report income from the sale of (a) personal property regularly sold under the installment method, or (b) real property held for resale to customers. But the installment method can be used to report income from sales of certain residential lots and timeshares if you elect to pay interest on the tax due on that income after the year of sale. See section 453(l)(2)(B) for details. If you make this election, include the interest in the total on Schedule 2 (Form 1040), line 14, and enter the amount of interest and “453(l)(3)” on the line next to the entry space.

If you use the installment method, attach a statement to your return. Show separately for 2025 and the 3 preceding years: gross sales, cost of goods sold, gross profit, percentage of gross profit to gross sales, amounts collected, and gross profit on amounts collected.

Line 2 Report your sales returns and allowances as a positive number on line 2. A sales return is a cash or credit refund you gave to customers who returned defective, damaged, or unwanted products. A sales allowance is a reduction in the selling price of products, instead of a cash or credit refund.

Line 6 Report on line 6 business income not reported elsewhere in Part I. Be sure to include amounts from the following.

Finance reserve income.
Scrap sales.
Bad debts you recovered.
Interest (such as on notes and accounts receivable).
State gasoline or fuel tax refunds you received in 2025.
Any amount of credit for biofuel claimed on line 3 of Form

Any amount of credit for biodiesel, renewable diesel, and sustainable aviation fuel claimed on line 11 of Form 8864.

Credit for federal tax paid on fuels claimed on your 2024 Form 1040 or 1040-SR.
Prizes and awards related to your trade or business.
Amounts you received in your trade or business as shown on Form 1099-PATR.
Other kinds of miscellaneous business income.

If the business use percentage of any listed property (defined under Line 13, later) dropped to 50% or less in 2025, report on this line any recapture of excess depreciation, including any section 179 expense deduction. Use Part IV of Form 4797 to figure the recapture. Also, if the business use percentage drops to 50% or less on leased listed property (other than a vehicle), include on this line any inclusion amount. See chapter 5 of Pub. 946 to figure the amount.