Is it OK to have business expenses more than business income i.e., negative business income?

[mylikuliku]

I'm a part time consultant. My business income this year is around $6,000 (reported in 1099-MISC). I bought asset like laptop, phone and tablet this year for this business. As a result, my business expenses is around $6,500. Is it OK to claim all the business expenses since now, my net business income is negative?

[AnnaB · Accepted solution]

Yes, and legally, you should claim all eligible business expenses along with all income.  In general, this does not cause problems; however, if you consistently have losses (3 years or more, for example), then the IRS could come back and consider this a hobby instead of a business and disallow the loss(es) claimed.  For hobby income (without a clear profit intent), then you can only deduct your expenses up to the income as an itemized deduction (and reduced by 2% of your adjusted gross income).

[fran11]

If you are running the business, but have not received income for the last 2 years, can you still write-off your expenses?

[SweetieJean]

The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/uac/business-or-hobby-answer-has-implications-for-deductions">https://www.irs.go...>

[msjewel8504]

MY FASHION CONSULTING BUSINESS IS IN MY HOME, DURING THE COVID INVASION, I DID NOT ALLOW ANYONE TO ENTER MY HOME, HOW CAN I CLAIM A BUSINESS LOSS

[AmyC]

The concern is that you were actively working to make money from home - not about the others in your house. There are plenty of ways to connect electronically with customers.  As long as you meet the requirements of a business, you can claim income and losses.

See Small Business and Self-Employed Tax Center for all things tax related.

@msjewel8504