How do I take a business tax loss on NJ state income tax when I didn't earn income from business in first year? ABCA isn't applying in this year's tax.

[brandog712]

I have full-time employment income and I would like to deduct by start-up business losses on my NJ state income tax. The start-up has not generated income in the first year, just expenses thus far.

[AmandaR1]

Do you have other types of business income? If you're self-employed costs are for an active and not start-up costs (like I explained below in my answer), then they will offset your regular income at the federal level and state level, but that has nothing to do with the ABCA.

[brandog712]

I have a business tax loss on my federal return. Turbo tax enters that loss with NJ state tax. However, instead of providing me a deduction to my 2017 taxable income, turbo tax is forcing things to ABCA in 2018. Why? I want to offset my taxable income this year.

[AmandaR1]

The Alternative Business Calculation Adjustment (ABCA) doesn't apply to business start-up costs. It allows you to offset 4 types of business and investment income before calculating tax. You can learn more about New Jersey’s alternative business calculation here.

You can't begin deducting expenses, until you have started your business, which the IRS defines (and New Jersey follows).  For example, a local store hasn't started until it's opened it's doors for business and people can come in buy things.  This will look differently depending on the type of business.

Prior to actively serving or selling to customers, all business expenses are tracked as start-up costs and cannot be deducted until the month your business 'starts.' Be sure you enter your start-up costs under "start-up costs" in the software and they will be deducted according to the rules:

1. Up to $5,000 can be deducted in the month your business starts (if not more than $50,000 was spent on start-up)
2. Since start-up costs affect your business for years to come, their deduction (in excess of $5,000) is spread out over the following years. This is calculated by dividing the remaining start-up costs by 180 months and deducting the qualified amount each year. 

[cattsky]

NJ does not allow you to deduct business loss if you don't have business income.

Wage is not an eligible type income to offset business loss. 

New Jersey is a just a horrible state to do business in.