I started a small sole-proprietor business to buy cars at the auctions, fix them and resell them. My first vehicle was a looser, I lost money on it. Can I report this loss on my schedule C to offset income from my W2 job? How can I do it?
If this is an actual business and your total business income is less than eligible expenses for the tax year, you have what's called a Net Operating Loss (NOL). You report that on Schedule C and bring it over to line 12 on Form 1040. The NOL can then be used against other income for the tax year, or can be carried forward or backward (through re-filing) depending on certain factors. In a loss year, you won't owe any self-employment taxes, but you'll still need to file Schedule SE. Check out this link and the IRS site for more info: How to Deduct Business Losses and Net Operating Losses
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