As a painting contractor, I buy paint for each customer, how do I deduct this?

[JustDucky923]

I realize that I take deductions on the Schedule C for supplies and tools that I buy. But it seems strange to buy paint (and other things like primer, wood filler, etc.) for each job and then get paid for the job (labor plus materials) and be taxed on something I bought for that specific job. As an example - I have a job where I charged $800 for labor and bought $200 worth of paint. The invoice I gave the client was for $1000. So when I do my taxes I include that $1000 as income. But $200 of that was not income, it was simply me going to to paint store "for" the client and buying something for them. If I simply claim the $1000 as income and then list the $200 as supplies, my taxable income does not go down by $200 - I pay tax (income and self employment tax) on an item I purchased for my client. It seems like an incorrect way to do this. Am I wrong?

[Opus 17]

You list the paint as a supplies cost.  You should end up paying income tax on your net earnings (gross income minus expenses) where your expenses include not only brushes and masking tape, but also the paint you are buying for the customers.  

[AnnetteB6]

To expand on the information shared by Opus17, if your Schedule C business income is not being reduced by $200 when you claim $200 of supplies or miscellaneous business expense, then you may be doing something wrong.  

Schedule C reports all of your business income ($1000 from your example) and all of your business expenses ($200 from your example, if you actually spent $200 on the supplies).  This would result in a total income for the Schedule C business of $800.  The $800 is the number used to calculate the self-employment tax and it is added to any other income reported on your return to calculate your taxable income for income tax.  

If you charged the customer $200 for supplies, but only had to spend $150, then your business income will be $50 higher than expected because your expenses were lower.  

My suggestion is that you work on your return using a simple example like you shared and see how the Schedule C income and your taxable income changes as you add your actual expenses.  You may need to 'preview your Form 1040' in order to see the interaction.  

How do I preview my TurboTax Online return before filing?

@JustDucky923

[VolvoGirl]

Supplies and all expenses should be subtracted from the income to give you a Net Profit or Loss on Schedule C.  Why do you think it's not?  Yes your taxable income should go down.  But you know you are paying 2 kinds of tax on Schedule C self employment income.  You pay regular income tax on all your taxable income and self employment tax on the Net Profit on Schedule C.

Where are you entering the income and expenses?  Maybe you are not entering the supplies on Schedule C?