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Once you have added up all your gross business income, and you've dug up all your deductible business expenses for the year, you can calculate your net business income by subtracting your expenses from your income. Hopefully, you still have some income left over after expenses are deducted! This amount is your net profit for tax purposes.
For sole proprietors, the net profit calculation is made on the bottom of the front page of your Schedule C or on Line 3 of your C-EZ. If you have more than one Schedule C, the results from each one are computed separately. The results from any and all Schedule Cs you have are totaled up and carried over to your individual income tax return (Form 1040, Line 12), where they will become part of your adjusted gross income (AGI). If you are filing jointly with your spouse, the net income from any Schedule Cs filed by your spouse is also included.
There are two more important issues to deal with in conjunction with computing your net profit for the year: