topic Do business expenses even matter if the deductions are less than the "Standard Deduction"? in Deductions & credits

Do business expenses even matter if the deductions are less than the "Standard Deduction"?

ghughes13 — Fri, 28 Aug 2020 20:34:39 GMT

I've got a little side business that'll bring in a few grand this year. If I only business expense $1k-$2k, does it even matter since the standard deduction was around 12k? From my understanding, I either take the standard deduction or itemize my deductions (are business expenses the same thing) on a 1040. So unless my deductions/business expenses are > the standard deduction, they don't matter and I'd just go with the standard deduction.

Does that change if it's an LLC?

Re: Do business expenses even matter if the deductions are less than the "Standard Deduction"?

VolvoGirl — Fri, 28 Aug 2020 20:40:11 GMT

What kind of LLC? Is it a Single Member LLC setup as an S Corp? You might have to file a separate LLC Business return.

No. Don't confuse itemized deductions on schedule A with your business expenses/deductions on schedule C. They are separate. For Schedule A personal deductions, you get to take your itemized deductions or the standard deduction, whichever is larger. Itemized deductions are things like Medical, Gifts to Charity, State Income Taxes Paid, Mortgage Interest, Property Taxes, Car Registration fees, etc.

You get to take both, your business expenses AND the Standard Deduction (or your personal Itemized Deductions). And you have to enter your business expenses. Be aware, if you have self employment income you can get in trouble for not reporting all your expenses to qualify for the EIC.

Re: Do business expenses even matter if the deductions are less than the "Standard Deduction"?

DoninGA — Fri, 28 Aug 2020 20:40:41 GMT

If you are a sole proprietor/independent contractor or single member LLC that has not incorporated you report all of your business income and expenses on Schedule C. The standard deduction is not relevant when reporting business expenses.

You are confusing itemized personal expenses that that are reported on a Schedule A where itemized deductions must be greater than the standard deduction for your filing status to have a tax benefit.

Schedule C is part of and included with your personal tax return, Form 1040.

Re: Do business expenses even matter if the deductions are less than the "Standard Deduction"?

Carl — Sat, 29 Aug 2020 00:52:48 GMT

Business expenses claimed on SCH C have absolutely nothing what-so-ever to do with your standard deduction on SCH A or your itemized deductions on SCH A. SCH C expenses are deducted from SCH C income and never touches the SCH A. Your SCH C expenses will not only reduce the amount of ordinay tax you will pay on that SCH C income, it will also reduce the amount of the additional 15.3% self-employment tax you pay on that SCH C income.