How to deduct losses from LLC

[donlelel]

Hi,

I have been a salaried employee of a company. I have created an LLC last year and I had bought some office space through this LLC that I rented out. But, overall, I ended up in negative last year for the LLC (let's say $10k) bc painting/carpeting/etc was more than I got on rent. Can I deduct that loss from taxes, kind of from my salary? That is, if I had a salary of $60k for the year and the loss of $10k for the LLC, would I pay taxes just for $50k?

I try to do the taxes by myself bc it's pretty expensive with an accountant plus I still need what to tell the accountant otherwise he wont file the taxes right/miss deductions/etc.

Tks a lot,

[AliciaP1]

Yes, in a roundabout way that is what will happen.  You will need to file a Schedule C for your LLC within your tax return.  If you choose to use TurboTax to file your taxes, the software will walk you through an interview to enter all your information correctly.

Take a look at How do I report income from self-employment? and What self-employed expenses can I deduct? to get some more information.

[Mike9241]

I had bought some office space through this LLC that I rented out.

this normally has to be reported on schedule E not schedule C but we do not have a full picture of what took place in 2021

you need to report the rental activity separate from an activity in which you sold products or services. if the schedule C reports net income that's subject to self-employment taxes. any rental activity loss can not be used to offset this income.  in addition, if the rental activity produced a loss, it may not be deductible due to passive activity rules.    if you are confused about this, you need to seek out a pro so your reporting is proper.  start out wrong this year and ensuioing years are likely to be wrong.  you may want to look yo Turbotax live which for an additional fee will prepare your returns. 

[donlelel]

For the LLC (owned 50-50 with my wife)

- we gave 1099 to the contractors (painting/carpeting/etc) and filed correspondingly with IRS for that

- we sent these forms to IRS: 1065 (which includes separately also schedules B-1, K-1, besides schedule B, K, L, M-1, M-2 inside the 1065 form), 8825, 4562

So my family income from salaries cannot be offset (this year, at least) with the losses from the LLC. What about next year (when I'll file for this year, 2022) - should I be able to deduct (all or some) of the 2021 losses from the LLC 2022 income (which income I hope to have next year)?

I do have the desktop version of Home & Business TT but it seems it's not really good for my case, probably I should have bought two TT, one for business only and one for home. This year, at least the business part, I filed manually, by post.

It was impossible also to get any help from IRS. I guess they're busy auditing. 

Tks a lot,

[donlelel]

 I replied already with more details but my reply is not visible, even if I got emails that I gained new badge for that / I see in my profile that I have the right number of posts. What's going on? Where are my replies going???

[donlelel]

Thanks so much for the help.

Whatever, now I see my test reply. So, lemme add again details.

The LLC is 50-50 with my wife.

I sent 1099 forms to the contractors and I filed accordingly with IRS

I filed the business papers with 1065 form (which includes inside it also sections for schedule B, schedule K, schedule L, schedule M-1 and M-2), 8825 form, 4562 form, separate schedule B-1 and K-1 for form 1065.

So you're saying I cant deduct the LLC business loss from my salary income basically. What about next year, when I file for 2022 taxes - if I have LLC income for the 2022, can I deduct the LLC losses (all?) from the previous year?

I'll mention also that I bought TurboTax Home&Business (desktop edition) but it seems it's not the right software to use in my case, it seems I should have bought separately Business and one of the Home ones. I ended up filing manually, by post mail for the business - I might be able to do it from the software for the personal taxes though, not sure yet.

Thanks so much,

[GeorgeM777]

Because you have a partnership with your spouse, the business loss/gain is passed through to each partner, namely, you and your spouse.  In other words, each partner will get their distributive share of the loss or gain depending on how the partners have determined such losses and gains should be allocated.  

In TurboTax Business you can prepare your partnership return.  In TurboTax Home & Business, you can prepare your personal tax return.  Your spouse will have to purchase a separate TurboTax Home & Business to prepare a return.  If you choose to purchase the CD version of TurboTax, you could prepare your personal return and that of your spouse's as that product can prepare up to five federal tax returns.

@donlelel

[GeorgeM777]

Yes, if you cannot use your partnership losses in a given year, then they will carryover to the following year.  You can learn more about partnership losses by clicking on this link:  New Limits on Partners' shares of partnership losses FAQs.  

@donlelel