How to deduce loss from a small business?

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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?

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Larry McClanahan, Financial Advisor

@LarryMcClanahan • 10/20/15 This answer was first published on 10/19/15 and it was last updated on 10/20/15.For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

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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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