Q. Can you have expenses from a side business that is for profit, but hasn't generated income the first year, to lower W2 taxable income?
A. No. At least not directly. But, for most people, the answer is effectively yes.
If you are actively in business, your report your income (even if 0) and expenses on Schedule C. If you have a net loss, that goes to line 3 of Schedule 1, then to line 10 of form 1040 where it lowers your total income, which effectively lowers your taxable income.
Q. Can expenses then offset W2 income? Some people said no, expenses for side business can only offset side business income. If there are no profits generated from side business, then the expenses get carried over to next year?
A. It depends. If you are actively in busimess, your business losses are deducted from your other income (on line 10 of form 1040). If your expenses are only "start up" expenses, they cannot be deducted, in the current year, but most be carried over; and then amortized (deducted as depreciation) over the next 15 years.
https://www.irs.gov/newsroom/heres-how-businesses-can-deduct-startup-costs-from-their-federal-taxes
