In the Business Expense section: Turbo Tax shows - Home Office Expense: $5000 and Other common business expense: $1000.
However, it is not actually deducting from my Federal Tax outstanding. Any idea why this is not working?
Expenses and deductions do not directly reduce your tax due. They can only reduce your income to zero. Then after you reduce your income to zero there is no more refund to get back but you still may owe for other things like self employment tax or the 10% early withdrawal penalty from 401k or IRA accounts.
Some expenses, such as home office or section 179 depreciation can only be used to reduce your schedule C taxable income to zero, and not to create a loss. Excess deductions for these carry over to the next year. And you have to answer yes to both questions about exclusive and regular use, not just one. The area of your home office must be used regularly and exclusively for business to deduct it.
Or you checked the box on 32b saying Some Investment is Not at Risk.
Sorry, I was not very clear with my question. Here is the problem I am having:
In Turbo Tax "Business Income and Expense" Section, there is a sub section "Business Expense" where I Turbo Tax is showing $5000 deduction and when I complete the Business Income and Expense section Turbo Tax says "Congratulation you get $5000 deduction". However nothing is getting deducted from my Federal tax return and when it shows me the 2020 Business Income deduction the amount is 0. So, I do not understand what is going on?
Does this make sense?