Business Expenses Without Revenue - Deductible or Not?

[LaughTrack]

I have an LLC which did have income for several years but, unfortunately, did not in 2020 (though I still paid expenses for Business Insurance.)   TurboTax is saying to me that these expense are "not allowed" on my Federal Taxes, but is allowing them on my Massachusetts taxes.   Is this correct?

[MinhT1]

If your business was active in 2020 but you did not have income, you are still allowed to claim ordinary and necessary business expenses such as rent or insurance, etc...

You can claim these expenses both on your Federal and state returns.

[LaughTrack]

Thanks, but TurboTax is telling me these deductions aren't allowed - 'not deductible" is the term - and isn't crediting me for them.   What do I need to do to fix this?

[MinhT1]

Did you mark that you actively participated in the business in 2020? If your business is active, you must say that you actively participated.

[LaughTrack]

Yes, I did actively participate and marked my the questionnaire as such.

[LaughTrack]

I think I've fixed this in the "Special Situations" questions so the deduction is now showing.   I have no tangible investment in the business.

[JeffreyR77]

Please clarify how you answered the Special Situations questions.  It is not clear how answering these questions would make a current operating loss appear.

[LaughTrack]

I answered the special situation question incorrectly at first.   I do not have money invested in the business, so "none of the above" was the correct answer.    At least it made my expense deductible.

[JeffreyR77 · Accepted solution]

Correct.  Checking any of those special situations could prevent the current deduction loss from being recognized.  The correct choice was None of the above.  Thank you for the clarification.