Can I write off business expenses when I had no income?

deborah-e-mannio — Thu, 06 Jun 2019 09:06:39 GMT

That depends on where you are in the life of the business...

MichaelMc — Thu, 06 Jun 2019 09:06:40 GMT

That depends on where you are in the life of the business.

Perhaps you have on ongoing business and had a year with no income. There are reasons for this: you accepted payment last year for a project that was all-consuming during the year; you had to deal with an illness in the family, etc.). In such cases, you may have incurred necessary and ordinary expenses without having any recognized income. Of course you should deduct these expenses in the year they are recognized.

Conversely, perhaps you are starting a business and have incurred expenses before you open the doors for business. In such a case, you can claim your business expenses, but not on your 2018 tax return. The general rule is that business startup expenses are deductible in the year when active trade or business begins. Since you had no income-generating events in 2018, your startup expenses will become deductible in 2019, when your new business begins to generate revenue. Please see IRS Pub. 535 Business Expenses for more information.

Also, you must distinguish between startup expenses (licenses, permits, legal fees, pre-opening advertising, etc.) and the amount spent on business assets (machines, equipment, vehicles, etc.). These assets are depreciable over their useful life, although in many cases can be expensed in the first year put in service under Section 179 of the Internal Revenue Code.

Note: The Tax Cuts and Jobs Act of 2017 increased the annual dollar limit on Section 179 deductions. For tax years beginning in 2018, the maximum section 179 expense deduction is $1,000,000. This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $2,500,000.

topic Can I write off business expenses when I had no income? in Deductions & credits

Can I write off business expenses when I had no income?

That depends on where you are in the life of the business...