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I run a small repair shop in NYC and this year 2020, I will need to report a loss. I never reported a loss before so I'm not sure if my knowledge of it is out of date or not.

I read that for 2020 returns we can file for "unlimited" loss. But was it previously we were only able to file a loss of maximum of $3000 per a year? Say if I had a business loss of $9000. I can only offset this loss over 3 years at $3000 each year?

What else do I need to know about reporting a business loss? I use taxact to do my own filing.

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business losses and capital losses are different. only capital losses in trading assets are capped if they are not offsetting capital gains somewhere else.

a single member LLC passes all expenses to you as deductions, and there is no cap on deductions there. if your single member llc has outside capital via debt or even credit cards or you just used your own savings, you can easily have spent more than you earned, resulting in negative adjusted gross income (AGI)

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  • so what is this new ruling about writing off unlimited losses for small business owners vs how they did it previously? Dec 10 '20 at 16:12
  • @Patoshiパトシ that's referring to something even better, Net Operating Losses (NOLs). The 2017 Tax reform bill had limited NOLs away from unlimited, to a cap that year & also limited how much they could be carried back & carried forward. The CARES Act essentially restored that under the guise of pandemic relief - but obviously special interests had written this beforehand and were waiting for Congress to be desperate no matter the context - NOLs have been mostly uncapped again, for now. These begin to apply if you have outside capital. You can always report all your expenses & see what happens.
    – CQM
    Dec 10 '20 at 23:34
  • report all my expenses and see what happens? so what if my expenses this year 2020 exceeds my income by negative -20k? what happens then? Dec 15 '20 at 22:34
  • @Patoshiパトシ then you have an AGI of -$20k. I got a Trump check for a negative AGI even though I thought it would be obvious that I made more that year, but I had more expenses too. Basically, you aren't the only one that will be in that situation sometimes and the government doesn't have any thoughts on the matter.
    – CQM
    Dec 16 '20 at 5:13
  • what is the trump check? Dec 16 '20 at 12:03

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