Schedule C Line H: Did You Start or Acquire This Business? When to Check the Box (2026 Freelancer Guide)

Published: October 8, 2026 · Reading time: 11 min

TL;DR: Line H on Schedule C is a single check box. The form reads "If you started or acquired this business during 2025, check here," and the instructions say to check it if you started or acquired the business that year. They add a second case that most guides leave out: check it too if you are reopening or restarting the business after temporarily closing it and you didn't file a Schedule C for it the year before. Checking the box is not an election and deducts nothing. Start-up costs are a separate matter under IRC 195: up to $5,000 in the first year, reduced by the amount total start-up costs exceed $50,000, with the rest amortized over 180 months starting with the month the business begins. Those are the 2025 forms, the current ones when this was written. The 2026 edition will say 2026.

You filed a Schedule C last year. This year you took a six-month contract job, shut the freelance business down for a while, and reopened it in the fall. Or you spent the spring building a portfolio site and opened for clients in September. Or you bought a retiring photographer's client list and equipment. Which of these should check Line H?

Line H is the shortest question on the form and one of the easiest to get wrong from memory. This guide goes through what the form and instructions say, who checks the box, what the box does not do, how it relates to start-up costs, and a worked example of a business that opens mid-year.

For all ten header questions together, see the Schedule C header boxes A through J guide. This post goes deeper on Line H alone.

What Line H Says, Word for Word

The 2025 Schedule C reads:

H If you started or acquired this business during 2025, check here

The 2025 Instructions for Schedule C (Form 1040) say:

If you started or acquired this business in 2025, check the box on line H. Also, check the box if you are reopening or restarting this business after temporarily closing it, and you didn't file a 2024 Schedule C for this business.

Both quotations were checked against the IRS form PDF and the IRS instructions page as fetched, not from a summary. Those are the 2025 editions, which were current when this guide was written. The Schedule C for tax year 2026 will carry 2026 in place of 2025, and the instructions should be checked again when they are published.

The instructions give no reason for the question. They say when to check the box and stop there.

Who Checks Line H: Four Situations

The reopening sentence has two conditions in it, and both must hold: the closing was temporary, and there was no Schedule C for this business the prior year. The instructions do not define "temporarily." They do not say how long a pause counts, and they do not address a seasonal business that closes every winter. If your situation is close to the line, ask a preparer rather than reasoning from the word.

A second business is its own Schedule C

Line H sits on each Schedule C. If you run two separate businesses and report each on its own form, the question is asked about "this business" on each one. Starting a second business in the year is a start for that second Schedule C. See filing multiple Schedule C businesses for how to tell when two activities are really one.

What Checking the Box Does Not Do

Three things the box is often assumed to do:

1. It does not make an election. Treas. Reg. 1.195-1(b) says: "A taxpayer is deemed to have made an election under section 195(b) to amortize start-up expenditures as defined in section 195(c)(1) for the taxable year in which the active trade or business to which the expenditures relate begins." The deduction comes from the start-up cost rules, not from the check mark.
2. It does not deduct anything. A check box carries no dollar amount. No cost becomes deductible, or more deductible, because you checked it.
3. It does not prove when your business began for tax purposes. Line H asks whether you started or acquired the business during the year. The start-up cost rules turn on when the "active trade or business begins," and the Schedule C instructions for Line H do not cite those rules or define that date. In many cases the two will line up, but the form does not say they must.

Be careful with guides, including some older ones, that say the box "triggers" the start-up rules. The instructions do not say that.

How Line H Connects to Start-Up Costs

The check box and the start-up deduction are neighbors, not the same thing. Here is the deduction, from the sources.

The statute. IRC 195(b)(1) allows a deduction for the year the active trade or business begins equal to the lesser of the start-up expenditures or "$5,000, reduced (but not below zero) by the amount by which such start-up expenditures exceed $50,000." The remainder is deducted "ratably over the 180-month period beginning with the month in which the active trade or business begins."

What counts. A start-up expenditure is an amount paid or incurred in connection with investigating the creation or acquisition of an active trade or business, creating one, or an activity engaged in for profit "before the day on which the active trade or business begins, in anticipation of such activity becoming an active trade or business." It must also be a cost that would be deductible if paid in connection with operating an existing business in the same field. Equipment you will depreciate is not on that list; see section 179 for freelancers and Schedule C Line 13.

The election is automatic. Under Treas. Reg. 1.195-1(b) the election is deemed made, and a taxpayer "may choose to forgo the deemed election by affirmatively electing to capitalize its start-up expenditures on a timely filed Federal income tax return (including extensions)." The 2025 Instructions for Form 4562 add: "Once made, the election is irrevocable." Do not read the capitalize option as a shortcut. It is a choice to give up the deduction.

Where the Schedule C instructions put it. In Part V, under "Business startup costs," the instructions say: "If your business began in 2025, you can elect to deduct up to $5,000 of certain business startup costs." They say the remaining costs "can be amortized over a 180-month period beginning with the month the business began," and that for amortization beginning in 2025 you complete and attach Form 4562. Part V is the Line 48 list, and the form says to enter the Line 48 total on Line 27b. Line 27a on the 2025 form is a different item, the energy efficient commercial buildings deduction.

When the clock starts. The 2025 Form 4562 instructions say the amortization period "starts with the month you begin business operations." Line 42 of Form 4562 is for amortization "for which the amortization period begins during your tax year."

For the full start-up cost rules, including what qualifies and what does not, read the start-up costs deduction guide and its companion, the Schedule C start-up costs guide.

Buying a Business: "Acquired" Is Not "Started"

If you checked Line H because you acquired a business, two rules are worth knowing.

The start-up clock. IRC 195(c)(2)(B) says: "An acquired active trade or business shall be treated as beginning when the taxpayer acquires it." So an acquired business begins at the closing, not when you decided to look.

The purchase price is not a start-up cost. An archived IRS Tax Tip (2021-166) says recoverable start-up costs for purchasing a business include only investigative costs incurred during a general search for or preliminary investigation of the business, and: "Costs incurred to purchase a specific business are capital expenses that can't be amortized." The Tax Tip is marked archival by the IRS, so use it as a signpost and confirm with a preparer.

The Form 4562 instructions list "Certain section 197 intangibles" among the costs you can amortize, which is where a purchased client list or goodwill may be recovered, but how a purchase price is allocated depends on what was bought. Keep the purchase agreement and closing statement, and see used equipment basis records for the equipment side.

Worked Example: A Freelancer Who Opens in September

Maya is a freelance video editor with no prior self-employment. She spends March through August 2026 getting ready and opens for clients on September 1, 2026. Her pre-opening costs, assumed for illustration:

(Her editing computer is excluded: it is equipment, recovered through depreciation or section 179, not a start-up cost.)

Line H. Maya started this business in 2026, so she checks the box on her 2026 Schedule C.

First-year deduction. The total is under $50,000, so the $5,000 is not reduced. The remaining $7,000 is amortized over 180 months, starting September, the month the business begins. September through December is four months.

Figures computed with node -e from the inputs above and rounded to the cent. The monthly figure is shown rounded for display; the 2026 and 2027 amounts are computed from the unrounded rate. The method matches Example 2 in Treas. Reg. 1.195-1(c), which takes $5,000 and then the remaining amount divided by 180 and multiplied by the months in the first year.

In 2027. Maya runs the same business all year and filed a 2026 Schedule C, so she leaves Line H blank. The Form 4562 instructions say that if you are reporting amortization of costs that began before the current tax year and you are not required to file Form 4562 for any other reason, you do not file it, and you "report the amortization directly on the 'Other Deductions' or 'Other Expenses' line of your return." That is the 2025 wording, so check the instructions for the year you file.

What the example does not settle. The Schedule C instructions say to list start-up costs in Part V and to complete Form 4562 for amortization that begins in the year. They do not show a line-by-line split of the $5,000 immediate deduction between Part V and Form 4562, so have your preparer confirm how it is presented. The example also does not estimate tax savings, which depend on the whole return, and it assumes the business has an actual start date supported by records.

If You Get Line H Wrong

The instructions do not describe a penalty or a process for a Line H mistake, and this guide does not state one. What it does carry is a practical risk on the start-up side. Treas. Reg. 1.195-1(b) says a change in the determination of the year the business begins is treated as a change in method of accounting if start-up costs were amortized for two or more years. A launch date you cannot support is where that sort of dispute starts. If you discover that you checked or left blank the wrong box on a filed return, see how to amend a Schedule C and talk to a preparer before you file anything.

Records That Support the Box

Dated pre-opening receipts matter most. Start-up costs are by definition paid before the business begins, so a receipt dated after launch is an ordinary expense, not a start-up cost, and the dates are how you tell them apart. For an organized receipt routine, see how to track Schedule C expenses and the under-$75 receipt rule. For a first-year business that drives to clients, see mileage logs in your first year.

Common Mistakes

1. Checking Line H every year. The box is for the year you start, acquire or restart. A continuing business leaves it blank.
2. Leaving it blank after a restart with no prior-year Schedule C. The 2025 instructions specifically call for the box in that case.
3. Checking it after a restart when you did file last year. The reopening sentence applies only if you did not file a Schedule C for the business the prior year.
4. Believing the box elects the start-up deduction. The election is deemed made under Treas. Reg. 1.195-1(b). The box is a separate question.
5. Putting equipment in start-up costs. Equipment is depreciated or expensed under its own rules.
6. Treating the purchase price of a business as a start-up cost. Costs to purchase a specific business are capital expenses.
7. Counting costs paid after launch as start-up costs. Start-up costs are paid before the day the business begins.
8. Using the Line 27a line for the Part V total. On the 2025 form, the Line 48 total goes on Line 27b.
9. Not writing the launch date down. The date drives which month the 180-month period begins.

How CentSense Helps

A first-year business lives or dies by its dated records. CentSense is built to keep receipts and mileage in one place:

• Receipts with dates. Scan or upload pre-opening receipts so each one carries its date and amount, which is what separates a start-up cost from an ordinary expense after launch.
• Mileage tracking. Log the drives for client meetings and launch errands from the first day.
• Export for your preparer. Hand a clean list of dated costs to the person who will decide which are start-up costs.

CentSense does not decide whether a cost is a start-up cost, does not tell you when your business began, and does not complete Schedule C or Form 4562. Those calls belong to you and your preparer.

Frequently Asked Questions

What is Line H on Schedule C, and who should check it?

Line H is a single check box near the top of Schedule C. The form reads "If you started or acquired this business during 2025, check here." The instructions say: "If you started or acquired this business in 2025, check the box on line H." They add that you should also check it "if you are reopening or restarting this business after temporarily closing it, and you didn't file a 2024 Schedule C for this business." These are the 2025 editions, the current ones when this was written; the 2026 forms will carry 2026 in place of 2025, so check them when they are published. If you ran the same business all year and filed a Schedule C for it the year before, leave Line H blank.

Does checking Line H make me elect the $5,000 start-up cost deduction?

No. Line H is a check box, not an election, and the Schedule C instructions do not connect it to the start-up cost rules. Under Treas. Reg. 1.195-1(b), a taxpayer "is deemed to have made an election" to deduct and amortize start-up expenditures for the year the active trade or business begins, and may forgo that by affirmatively electing to capitalize them on a timely filed return, including extensions. The Schedule C instructions describe the deduction separately, in Part V: "If your business began in 2025, you can elect to deduct up to $5,000 of certain business startup costs." The $5,000 is reduced, but not below zero, by the amount total start-up costs exceed $50,000, and the remainder is amortized over 180 months. Treat the box and the deduction as two separate things and confirm the details with your preparer.

I bought an existing freelance practice. Do I check Line H?

The form says "started or acquired," so acquiring a business is a reason to check the box. The tax code points the same way for the start-up rules: IRC 195(c)(2)(B) says "An acquired active trade or business shall be treated as beginning when the taxpayer acquires it." The cost of buying the business is a different question from start-up costs. An archived IRS Tax Tip (2021-166) says recoverable start-up costs for purchasing a business include only investigative costs from a general search or preliminary investigation, and that "Costs incurred to purchase a specific business are capital expenses that can't be amortized" under the start-up rules. How the purchase price is recovered depends on what you bought, so have a preparer review the purchase agreement.

I paused my business for a year and am starting again. Do I check Line H?

Possibly. The 2025 instructions say to check the box "if you are reopening or restarting this business after temporarily closing it, and you didn't file a 2024 Schedule C for this business." Both conditions are in one sentence: the closing must have been temporary, and there must be no Schedule C for the prior year. If you did file a Schedule C for the prior year, that sentence by its terms does not call for the box. The instructions do not define "temporarily," and they do not say how the box interacts with start-up costs for a restarted business, so if you spent real money getting ready to reopen, ask a preparer whether any of it is a start-up cost or an ordinary expense.

Does Line H mean I can deduct everything I spent before my first client?

No. Checking the box deducts nothing. Pre-opening costs are start-up costs under IRC 195 only if they are the kind of cost that would be deductible once the business is operating and are paid before the day the business begins. Equipment is not a start-up cost: it is depreciated or expensed under its own rules. For costs that do qualify, you can deduct up to $5,000 in the first year, reduced by the amount total start-up costs exceed $50,000, and amortize the rest over 180 months. The 2025 Form 4562 instructions say the amortization period "starts with the month you begin business operations." Confirm which of your costs qualify with a preparer.

Do I check Line H again in my second year, or for a second business?

Not in the second year of the same business: the instructions tie the box to starting, acquiring or restarting the business in the tax year. Continuing amortization from an earlier start-up year does not require the box. A second, separate business reported on its own Schedule C is a separate question: if you started or acquired that business during the year, the same instruction applies to that Schedule C. The instructions do not give a detailed rule for businesses that overlap or share a name, so if you are unsure whether two activities are one business or two, ask your preparer before you decide how many Schedule Cs to file.

Why does the IRS ask this question at all?

The Schedule C instructions do not say. They tell you when to check the box and nothing about what the IRS does with the answer, so any explanation beyond that is a guess. A reasonable reading is that it flags a return from a business in its first year or restart year, when the start-up cost rules may apply, but the instructions do not state it as the reason. What you can control is accuracy: check it when the instructions say to, leave it blank when they do not, and keep records of the date the business began.

Authoritative References

• Schedule C (Form 1040) 2025 form, Line H
• Instructions for Schedule C (Form 1040) (2025 edition): Line H; Part V, "Business startup costs"; Line 48
• Instructions for Form 4562 (2025 edition): Part VI, "Startup and organizational costs," Line 42 and Line 43
• IRC 195, Start-up expenditures
• Treas. Reg. 1.195-1, Election to amortize start-up expenditures
• IRS Tax Tip 2021-166, Here's how businesses can deduct startup costs from their federal taxes (archival)

Start the first-year record on day one. Start a free CentSense account, scan your pre-opening receipts with their dates, log your first client drives, and hand your preparer a clean export. The free tier includes 10 AI receipt scans a month, no credit card required, and the Solo plan is $5/month for unlimited scans and mileage tracking.

This guide is general education for U.S. self-employed taxpayers filing Schedule C. It is not personalized tax advice. Whether you started, acquired or restarted a business, when it began for tax purposes, and which costs are start-up costs depend on your facts and are best confirmed with a CPA or EA. The worked example uses assumed costs and dates for illustration.