So I have an LLC for a construction company I started in 2015. During 2015, I started it late in the year. I'm the only one listed on the LLC. The main expenses in 2015 were the business license which cost roughly $500.00. I didn't claim any expenses that year. I also didn't have any customers that year, as I was just setting up the business while working a regular full time job.

In 2016, I still didn't have any customers and kept my full time job. I was trying to attract customers though, so I had a website made, and spent a good amount on advertising (approx $1500.00). Still no income though, which means no profit, and a loss of $2000.00 (the $1500 on advertising and the $500 renewal for my LLC registration).

The business was set up with a FID, bank account, and valid LLC registration for Massachusetts. My question is, can I deduct my business expenses on my Federal and/or State taxes? I currently file my taxes all together on my personal return, my company doesn't file a separate return. I would assume I can enter a loss of $2000 for the business, but is that legally allowed when there is no sales, income, or profits?


The answer is "Yes", You can deduct them. As long as you showed that you put in effort to make a profit then you can deduct business expenses.

  • 1
    Though if you can't demonstrate a serious effort, this won't survive an audit. And I think the IRS starts telling you "no, that's a hobby" if you can't demonstrate significant income/investment after a few years.
    – keshlam
    Jan 31 '17 at 2:58
  • I don't know about the USA, in other countries the tax office will say "we think it's a hobby" and you can't deduct it, but once you make money you can deduct it. Like "remember that 'hobby' you wouldn't let me deduct? I made 20,000 so obviously it wasn't a hobby".
    – gnasher729
    Apr 1 '17 at 23:20

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