Hello,
If you do not materially participate in the operation of the business, the losses could be subject the the Passive Activity Loss limitations where your passive losses can only offset other passive income.
If you do materially participate and actively involved in the business operations, the passive loss rules do not apply.
In 2017, the Tax Cuts and Jobs Act (TCJA) passage created a provision limiting the extent to which loss can offset income. To put it in simpler terms, you cannot deduct an excess business loss in excess of the threshold amount, and instead, that excess carries forward as a net operating loss, subject to NOL rules.
For 2022, the threshold amount is $270,000 ($540,000 if Married and Filing Jointly).
