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Posted by: Jim on 2010-02-06, 12:07:31
If you and your wife file jointly and either you or your wife were actively engaged in the business, then any business income/ losses are added to your net income. So, if you made 30K in W-2 wages and your business loss was 10K, then you only pay taxes on the net 20K. You'll need to fill out Schedule C or C-EZ, but the income/ loss on that schedule will then get added to your 1040 income. You might want to talk to a professional or buy some tax software about this because some people try to stretch the rules to avoid taxes: --You'll need good documentation of the business expenses/ income. Make sure this isn't perceived as a hobby because losses on hobbies aren't deductible. Example: I race cars on the weekend. If I'm trying to get sponsored and make an income to be a professional race driver, then related expenses might be deductible. If I'm just doing it for fun, then it's a hobby and none of the expenses are deductible. so, if your business might be considered a hobby, make sure you have enough documentation that the activities were business related. --Be careful about taking a home office deduction as this is looked at closely by the IRS since it's abused. |
