ErnieS0
Expert Alumni

Get your taxes done using TurboTax

You are allowed to deduct any ordinary and necessary business expenses. As long as you have receipts you should be good.

 

Some of your expenses may not be deductible in full in 2021. For example some equipment and licenses may have to be depreciated, i.e. written off over several years.

 

The IRS wants you to make a profit in three of every five years on a rolling basis, otherwise they can classify your business as a hobby and disallow losses. Some businesses have losses for longer periods. If audited, you would have to show you are operating in a professional manner and are trying to make a profit.

 

A business loss can be applied against other income. If your total income is negative you may have a net operating loss that can be carried to next year.

 

Business or Hobby? Answer Has Implications for Deductions

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