Excise taxes that are ordinary and necessary for the conduct of your business should be entered on Line 23 of your Schedule C:
Thanks, I entered into line 23 of schedule C. I had it before as a separate custom line "State Excise Tax". My question is, any deduction in this form is against your income tax based on you tax bracket, while the state excise tax I paid should be deducted from tax directly as $ to $ not % of that.
For example: I own $4000 tax and I paid $2500 excise tax. thus I should paid $1500. But the line 23 only deduct 20% of $2500 = $500 from $4000
Am I wrong?
Schedule C determines the net profit (or loss) from your sole proprietor business. The net profit (or loss) is then applied to your Form 1040. Thus you may not receive a dollar-for-dollar benefit from a single line item expense on your Schedule C.
Q. For example: I own $4000 in federal income tax and I paid $2500 excise tax. Thus I should only pay $1500, in federal income tax. Am I wrong?
A. Yes, that is wrong.
Although the $2500 is a "tax", for purposes of your business tax return (Schedule C), it is only a deduction from your business income. That is, your business profit will be reduced by $2500 and you will pay tax (both federal income tax and self employment tax) on $2500 less income. So ~$500 sounds about right.