Schedule C Line 10: Commissions and Fees Deduction Explained for Freelancers (2026 Guide)

Published: May 21, 2026 · Reading time: 10 min

TL;DR: Schedule C Line 10 is the deduction line for commissions and fees you pay out — broker splits, marketplace platform fees (Etsy, Amazon, eBay, Uber, DoorDash, Upwork), referral and finder's fees, franchise royalties, and the merchant-processor fees from Stripe, Square, and PayPal. It's distinct from Line 11 (contract labor — sub-contractor services), Line 17 (legal and professional services), and Line 27a (other catch-all). Commissions paid to non-corporate payees totaling $600+ per year require Form 1099-NEC under IRC §6041A. Always report revenue gross on the front end and deduct the processor fee on Line 10 — never net — because the 1099-K filed by the platform under IRC §6050W reports the gross figure, and netting creates a reconciliation flag.

Freelancers earning revenue through marketplaces, affiliate programs, brokerages, and online platforms regularly miscategorize their largest expense. The merchant-processing fee on a $40,000 Stripe-payment year is over $1,000 — and the marketplace commissions on a $200,000 Amazon FBA year can run $20,000+. Both belong on Schedule C Line 10. This guide walks through exactly what qualifies, what doesn't, the 1099-NEC mechanics, and the bookkeeping setup that produces an audit-defensible Line 10 figure in 2026.

What Schedule C Line 10 Covers

Line 10 on the 2026 Schedule C is captioned "Commissions and fees" and is reserved for payments made to third parties in exchange for transactions, bookings, or marketplace access that produce revenue for your business. The category is intentionally narrow — it does not pick up service fees you pay for things rendered to the business itself (those land on Line 17).

The mechanical test: did the payee earn this by originating, facilitating, or processing a revenue-generating transaction for me? If yes, Line 10. If they delivered a service to my business that didn't tie to a specific transaction, Line 11 or Line 17.

The Gross vs Net Trap: Always Report Revenue Gross

The single most common Line 10 mistake is netting the platform fee against revenue and skipping Line 10 entirely. This creates a reconciliation problem that triggers IRS CP2000 letters.

Under IRC §6050W every payment-card or third-party-network transaction settled through Stripe, Square, PayPal, Etsy, Amazon, eBay, Uber, DoorDash, Upwork, and any other platform must be reported on a 1099-K showing the gross amount. The 2024 Inflation Reduction Act adjustments and Notice 2023-74 phase-in landed at the $2,500 threshold for 2025 transactions (reported on 2026 1099-Ks) and $600 for 2026 transactions (reported on 2027 1099-Ks). See the 1099-K threshold 2026 guide.

The cleanest treatment:

• Revenue (gross) — match the 1099-K figure exactly. Etsy Q1 reports $48,200 in gross sales — your revenue line is $48,200.
• Line 10 (platform fees) — back out Etsy's $0.20 listing + 6.5% transaction + 3% + $0.25 payment processing. On $48,200 in sales that's roughly $4,500–$4,800 in fees.
• COGS (Part III) or Line 22 supplies — your actual material costs for what you sold.

The net effect is the same — but reporting gross matches your 1099-K to your Schedule C revenue line, which is what the IRS Automated Underreporter (AUR) system compares.

Real Estate Agent Commission Splits — The Two-Sided Mirror

Real estate brokerage is the textbook Line 10 setup. A $1,000,000 home sale with a 5% total commission produces a $50,000 commission pool split between buyer-side and seller-side brokerages, then split again with the agent.

For the selling-side agent receiving $14,400 of net commission from a $25,000 gross commission after a 60/40 broker split:

• Revenue — $25,000 (the gross commission, as reported on the agent's 1099 from the brokerage)
• Line 10 — $10,000 (the 40% paid back to the broker)

For the broker receiving the same $25,000 commission deposit before splits:

• Revenue — $25,000 (the gross commission from the closing)
• Line 10 — $14,400 (the 60% paid to the selling agent) + any co-op buyer-side commission paid + any referral fee paid

Document every split with the ALTA Settlement Statement (the modern HUD-1 replacement) showing each party's disbursement. The settlement statement is the original-source document under Treas. Reg. §1.6001-1.

For the rest of the real estate agent deduction stack, see the real estate agent tax deductions guide.

Marketplace Sellers: Etsy, Amazon, eBay, Shopify

Online sellers face the most complex Line 10 mechanics because every platform layers multiple fees:

The Amazon FBA monthly storage fee is technically a fulfillment service, not a commission — most CPAs allow either Line 10 or Line 27a, but Line 27a is cleaner because it's a flat monthly fee untied to a specific transaction. Pick one and stay consistent year to year.

For the broader Etsy seller deduction map, see the expense tracker for Etsy sellers guide.

Rideshare and Delivery Drivers: Line 10 Is the Biggest Number

For Uber, Lyft, DoorDash, Instacart, GrubHub, and Shipt drivers, Line 10 is often the largest single deduction on the entire Schedule C — larger than mileage.

A 2026 full-time Uber driver grossing $80,000 in fares typically pays $20,000–$24,000 in platform fees (25–30% Uber take rate including booking fee, safe-rides fee, and CA-required commercial-insurance pass-through). All of that lands on Line 10.

The cleanest workflow:

1. Download the annual tax summary from each platform (Uber's Tax Summary, DoorDash's Annual Earnings Report, Instacart's Tax Center).
2. Match gross fares + tips to your Schedule C revenue line.
3. Match platform service fees to Line 10.
4. Layer mileage on Line 9 at $0.725/mile (see the IRS mileage rate 2026 guide) and platform-required equipment (phone mount, dashcam) on Line 22.

The annual tax summary from each rideshare platform is the substantiation document — keep the PDF and the underlying CSV trip log. For the full rideshare deduction map, see the rideshare and delivery driver tax deductions guide.

Affiliate, Referral, and Finder's Fees

Affiliate marketing payouts and referral commissions are Line 10 deductions for the paying side. A SaaS company that pays its top affiliate $18,000 in commissions over the year deducts it on Line 10. A consultant that pays a $5,000 referral fee to another consultant who passed along a client deducts it on Line 10.

1099-NEC required under IRC §6041A when total payments to a single non-corporate payee hit $600+ in the calendar year. Issue by January 31 of the following year. The deadline is fixed and the late-filing penalty stacks per missed form under IRC §6721.

Common 1099-NEC traps for commissions:

• Paying an LLC — single-member LLCs are disregarded for federal tax purposes; if the LLC is owned by an individual, issue the 1099-NEC. If the LLC has elected S-corp or C-corp taxation, no 1099-NEC required.
• Collecting Form W-9 upfront — get the W-9 before you make the first payment, not in January when you scramble for tax IDs. The W-9 also resolves the corporate/non-corporate question.
• Reimbursements vs commissions — a true reimbursement of expenses (with backup documentation) doesn't trigger 1099-NEC; a commission paid as "expense reimbursement" to dodge reporting is still a commission to the IRS.

Franchise Royalties: Line 10 vs Line 13

Franchise economics produce two different tax outcomes:

• Ongoing royalty (percentage of sales) — Line 10. A Subway franchisee paying 8% of weekly gross sales as a royalty plus 4.5% advertising fund deducts the entire ~12.5% on Line 10 in the year paid. A H&R Block franchisee paying a 30% royalty on tax-prep revenue, the same.
• Initial franchise fee (lump sum at signing) — Line 13 (Depreciation). Under IRC §197(d)(1)(F), a franchise is a §197 intangible amortized straight-line over 15 years (180 months). A $50,000 initial franchise fee produces ~$3,333/year of amortization on Line 13 for 15 years — not a Line 10 deduction.

The split matters because franchisees often write the initial fee off in year one. The IRS catches this consistently because the franchisor reports the fee structure to the IRS via Form 1099-MISC Box 7 (or Box 2 if classified as royalty), and the timing mismatch is automated.

Merchant Processing Fees: The Hidden Five-Figure Deduction

For any freelancer accepting credit cards through Stripe, Square, PayPal, Shopify Payments, Apple Pay, or Google Pay, merchant-processing fees are a meaningful Line 10 deduction that's almost always invisible because the platform nets the fee at deposit.

A freelancer running $120,000 of revenue through Stripe at 2.9% + $0.30 per transaction:

• ~$3,480 of percentage fee + ~$300 of fixed fee per 1,000 transactions
• Roughly $3,800 on Line 10

The bank deposit you see in your account is net — but for tax purposes, you report the gross charge as revenue and the fee on Line 10. Stripe, Square, and PayPal all produce a monthly fee summary that's exportable to CSV. Capture it once a month into your bookkeeping and Line 10 fills itself in.

Some processors charge a separate monthly base fee (Stripe's $0 base, Square's $0 base, PayPal Pro's $30/mo); the base fee is Line 27a (Other) because it's not transaction-tied.

What Doesn't Belong on Line 10

These commonly get mis-shelved onto Line 10 — don't put them there:

• CPA, bookkeeper, attorney, tax preparer fees → Line 17 (Legal & professional services). See the Schedule C Line 17 guide.
• Sub-contractor labor (VA, video editor, graphic designer, copywriter) → Line 11 (Contract labor). See the Schedule C Line 11 guide.
• SaaS subscriptions (CRM, accounting software, design tools) → Line 22 (Supplies). See the Schedule C Line 22 guide.
• Bank fees, wire fees, overdraft, chargeback fees → Line 27a (Other expenses). See the Schedule C Line 27a guide.
• Advertising spend (Facebook, Google, Pinterest ads) → Line 8 (Advertising). See the Schedule C Line 8 guide.
• Initial franchise fee → Line 13 (Depreciation/§197 amortization).

Putting items on Line 10 that belong elsewhere doesn't change your total tax — but it flags the return for review if any category looks unusually large relative to revenue.

Documentation the IRS Wants for Line 10

Commissions and fees are not in the IRC §274(d) heightened-substantiation bucket (that's reserved for travel, meals, vehicle, and listed property). The general Treas. Reg. §1.6001-1 records rule applies: you must keep records sufficient to establish the amount and business purpose. For Line 10 specifically:

The contemporaneous-records rule under Treas. Reg. §1.6001-1 doesn't require receipts in the same way travel does — but if you can't produce the platform statement at audit, the deduction is at risk under the Cohan rule. See the bank statements vs receipts guide for the general substantiation framework.

Common Line 10 Mistakes

• Netting platform fees against revenue. Reports the wrong gross figure to the IRS, mismatches the 1099-K, and triggers a CP2000.
• Skipping the 1099-NEC for affiliate or referral payouts. $600 threshold per non-corporate payee per year. The §6721 penalty stacks per missed form.
• Putting Line 17 services on Line 10. A CPA fee is not a commission. A bookkeeper is not a commission. Keep professional services on Line 17.
• Deducting the initial franchise fee in year one. §197 amortizes it over 15 years on Line 13.
• Mixing contract labor onto Line 10. A VA on retainer is Line 11, not Line 10.
• Skipping the platform's annual tax summary. Every marketplace exports one — Etsy, Amazon, eBay, Uber, DoorDash, Instacart, Upwork, Fiverr. It's the cleanest substantiation document.

How CentSense Tracks Line 10 Automatically

Marketplace fees, processor fees, and affiliate payouts are scattered across multiple platforms by nature — Stripe in one tab, Etsy in another, Uber's tax summary in a third. CentSense's expense scanner reads platform statements and processor exports and maps them to Schedule C Line 10 automatically. The project feature lets you tag commissions by revenue source ("Etsy shop A," "Amazon FBA," "Stripe — direct clients") so the line-item export at tax time already groups by channel.

For freelancers running revenue through three or four marketplaces, that grouping is the difference between a confused tax-time scramble and a clean Schedule C handoff to your CPA.