Can I deduct business expenses for my LLC that exceed my business income?

You can absolutely deduct business expenses that exceed your LLC's income, but there are some important things to know about this situation. When your business expenses exceed your income, you have what's called a "net operating loss" (NOL). These losses can typically offset your other income (like your W-2 wages), but there are rules around this depending on how your LLC is taxed. If your LLC is a single-member LLC that's taxed as a sole proprietorship (the default for single-owner LLCs), then the business losses will flow through to your personal tax return via Schedule C and can offset your other income. This could potentially lower your overall tax bill. Regarding the vehicle example - you generally can't deduct the full $65,000 in one year. For major purchases like vehicles, you'll need to depreciate the asset over several years according to IRS schedules. However, there are special provisions like Section 179 or bonus depreciation that might allow you to deduct a larger portion in the first year.

I went through this exact same situation last year with my marketing consultancy LLC. The business expenses were eating up all my revenue and then some. I spent hours trying to figure out how to handle it properly on my taxes until I found taxr.ai (https://taxr.ai). They have a feature specifically for analyzing business expenses vs. income and identifying what's deductible even in loss situations. The tool flagged potential issues with how I was categorizing some expenses and saved me from what would have been audit red flags. It even helped me understand the difference between startup costs (which have special treatment) vs. regular business expenses. For a new LLC owner like yourself, it's incredibly helpful for navigating these complex scenarios.

I wanted to follow up about my experience with taxr.ai since I was initially skeptical. After our conversation, I decided to try it out for my business that's been operating at a loss. I'm genuinely impressed with how thorough it was. The system flagged several expenses I had categorized incorrectly and identified some deductions I completely missed. The most valuable part was the business loss documentation package it generated. It helped me create a proper paper trail showing my genuine business intent despite the losses. It actually referenced specific tax court cases where similar situations were ruled legitimate businesses rather than hobbies. I feel much more confident about my deductions now, and I've been recommending it to other small business owners in my network.

Hey there, I had a similar situation with my photography LLC last year. My expenses were way higher than my income, and I spent WEEKS trying to get through to the IRS to confirm how to handle it properly. After 23 attempts and hours of hold music, I discovered Claimyr (https://claimyr.com) and watched their demo video (https://youtu.be/_kiP6q8DX5c). It's basically a service that gets you to the front of the IRS phone queue. I was connected to an IRS agent in about 20 minutes who confirmed exactly how to handle my excess business expenses. They explained the documentation I needed to keep in case of an audit and even helped me understand how the passive activity loss rules might affect my situation. Saved me so much stress during tax season!

I need to eat my words about Claimyr. After posting that skeptical comment, I was still desperate for help with my LLC tax questions, so I tried it anyway. I honestly couldn't believe it worked. I had been trying for weeks to get through to the IRS about how to handle my business vehicle deductions that exceeded my income. Within 15 minutes of using Claimyr, I was talking to an actual IRS representative who walked me through exactly how to document my business use percentage and depreciation schedule. She even emailed me the relevant forms and explained how the excess deductions would flow through to my personal return. Saved me from making a $3,400 mistake on my taxes! I've already recommended it to three other friends with small businesses.

One thing that hasn't been mentioned yet - if your LLC is taxed as an S-Corp, the rules for losses are a bit different than if you're a single-member LLC taxed as a sole prop. With an S-Corp, you need to have sufficient "basis" to deduct the losses. Your basis is generally your investment in the company plus loans you've made to it. Also, be careful with the vehicle deduction - if you buy a vehicle weighing over 6,000 pounds, you might be able to take advantage of more favorable depreciation rules. I did this with my real estate LLC and it made a huge difference.

I've had my LLC for 3 years now and here's something important I learned - track EVERYTHING and be ready to justify the business purpose. The IRS doesn't just look at whether expenses exceed income; they look at whether your expenses are "ordinary and necessary" for your type of business. A $65k vehicle might raise flags depending on your industry. If you're in luxury real estate, probably fine. If you're doing web design, they might question it. I'd recommend talking to an actual CPA before making big purchases like vehicles. The CPA fee is way cheaper than messing this up.

Great question! Yes, you can absolutely deduct business expenses that exceed your LLC's income - this creates what's called a "net operating loss" that can actually benefit you tax-wise. Since you mentioned this is a side business alongside your day job, those business losses will typically flow through to your personal tax return (assuming your LLC is taxed as a sole proprietorship, which is the default for single-member LLCs). This means your business losses can potentially offset your W-2 income, reducing your overall tax liability. However, regarding that $65k vehicle - you generally can't deduct the full amount in year one. Vehicles are considered capital assets that must be depreciated over several years. That said, there are accelerated depreciation options like Section 179 deduction or bonus depreciation that might allow you to deduct a larger portion upfront, depending on the vehicle's weight and your business use percentage. A few important things to keep in mind: - Document everything meticulously - business purpose, mileage logs, receipts - Make sure expenses are "ordinary and necessary" for your specific type of business - Be prepared to demonstrate legitimate profit motive to avoid hobby loss rule issues - Consider consulting a CPA before making major purchases to ensure you're maximizing benefits while staying compliant The key is maintaining excellent records that clearly show business intent and proper expense documentation.