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I have a successful rental business, it's regularly profitable and it's an llc

If I start another business, and that business records a loss for the year, can I write off that loss against the profits from my other business?

An example would be if I start a company that's building software and we spend 2 years building with no profits. Can I take those losses and reduce the tax burden from my rental income?

Can I write off those losses against other streams of income I have like from stocks as well?

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The government has declared landlording and investing to be 'passive' activities that do not belong on Schedule C. Landlording is on Schedule E. Investing on Schedule D (capital gains/losses) and 1040 (dividends). If you wish to make these activities active, you would have to get a real estate license (for landlording) and become a day-trader (for 'active trader' status). It sounds like your activities in 2020 do not qualify, so they are 'passive'.

When it comes to 'active' income, your sole proprietorships' profits and losses will cancel out, but you first have to account for each business on separate Schedule C forms: https://blog.taxact.com/schedule-c-self-employment-income/

Form 1040 will tell you to what extent (if any) that 'active' Schedule C losses can reduce your taxes on 'passive' income.

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  • Okay cool so that means that the profits are taxed and the losses are recorded and at the end of the day when it all passes through to me they are combined to produce one final taxable amount? – Anthony Russell Feb 28 at 21:21
  • Is it dollar for dollar? Like I make one dollar in my rentals and I have one dollar of expenses in the other business, they cancel out and the taxable income is zero? – Anthony Russell Feb 28 at 21:23
  • You can't simply use Schedule C for landlord income or investment income; the government doesn't want individuals running all their income through Schedule C. From the Schedule C Instructions: "Rental real estate activity. Unless you are a qualifying real estate professional, a rental real estate activity is a passive activity, even if you materially participated in the activity. If you have a loss, you may need to file Form 8582 to apply a limitation that may reduce your loss. See the Instructions for Form 8582." irs.gov/instructions/i1040sc#idm140094050798448 – Orange Coast- reinstate Monica Mar 1 at 17:44
  • Changed my answer to explain the important 'active' and 'passive' aspects of your individual income. – Orange Coast- reinstate Monica Mar 1 at 18:56

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