View Full Version : New sole prop deduction question

12-07-2005, 04:10 PM
Hi, I started a small home business for about 5 months or so, selling and fixing computers. I've made a profit but after going over my accounting, my deductible business expenses far surpass my income from the small business. I also have a 9-to-5 job as a computer tech and rake in a decent wage.

I use about 33% of my studio apartment solely for business use, including building PCs and storage. I've run over 500 miles in business use and had a good deal of start up costs such as fees, tools and such. Its nearly the end of the year and my expenses are about $3200 while I've only made about $1300.

My question is ... am I only able to deduct the $1300 from my income taxes? Can I deduct the remainder from my taxes from my full time job? It looks like my regular income taxes are going to be at least $8k.

Should I try to minimize expenses or go ahead with a few business purchases that is in great need? If I'm able to deduct all my expenses, I am very much in need of a business computer (probably a laptop) to be able to work on my website as well as do accounting, print up quotes and invoices and offer customers more onsite repair options. The laptop would greatly increase my productivity as well as potential profits. But if I'm going to be stuck with a $1900 loss which I can't deduct (and forced to carry the loss over), I'd rather not get more in the red.

Thanks for any advice you guys can offer.

12-07-2005, 04:49 PM
I did some more researching and I think I found my answer.

This was taken from howtoadvice.com/AvoidTaxMyths

Myth: You're not making a profit so there is no advantage to filing business income taxes.

Truth: This is so not true! There's many tax advantages to filing a Home-Business tax return and especially so if you are not making a profit. If you also work a job, be it part-time or full time, in addition to your Home-Based business it is especially beneficial to you to file a business tax return.

Expenses incurred in your business can be taken against your job income thus reducing your taxable dollar, which decreases your tax liability.

This is basically what I was asking, being able to deduct business expenses from my full time job income. I was pretty sure this was the case but I needed to be certain before I took the dive. Can anyone confirm this, I don't really trust the site.

01-13-2006, 09:16 AM
I know this a old post, but great question and answer. To add to it, one of the reasons for starting a business is to take write off's on your taxes, especially if you have a business and a w-2 job. I have had both and the write-off's really add up at tax time.

Also make sure you take full advantage of the mileage write-off for business miles. In 2005 the rate was 40.5 cents per mile up to Sept, then the IRS increased the rate to 48.5 from Sept 1 to Dec 31. Just do the math, 1k miles @ 40.5 cents = $405 tax free income from the business.