How to claim net operating loss in TurboTax for my sole proprietorship startup with no 2024 income?
Title: How to claim net operating loss in TurboTax for my sole proprietorship startup with no 2024 income? 1 So I launched my side hustle (handmade jewelry business) in late 2024 and sunk about $4,200 into initial expenses. I've got a home office setup, bought specialized tools, paid for a website domain, and invested in materials, but didn't actually make any sales until January 2025. I'm now doing my taxes in TurboTax and I'm confused about how to handle this. In the self-employment section, I've entered all my legitimate business expenses, but I don't have any 1099s or income to report for 2024. Is there a way to claim these startup costs as a net operating loss to reduce my regular income from my day job? Or am I just out of luck until next year's taxes when I can actually show some revenue?
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Carmen Ortiz
12 You absolutely can claim your startup business expenses even with zero income for the year! This is considered a net operating loss (NOL) for your Schedule C business. In TurboTax, you should still complete the self-employment/business section. Enter zero for your income, but add all your legitimate business expenses. TurboTax will generate a Schedule C showing the loss. This loss will automatically flow to your Form 1040 and offset your other income (like your W-2 earnings), reducing your overall taxable income. Just make sure your business is legitimate and not a hobby - the IRS looks closely at businesses that consistently show losses. You should have documentation showing your intent to make a profit (business plan, marketing efforts, etc.) even though you hadn't made sales yet.
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Carmen Ortiz
•5 Thanks for the info! Do you know if there's a limit to how much of a business loss I can claim against my regular income? I heard somewhere there might be restrictions.
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Carmen Ortiz
•12 There's no specific dollar limit on business losses you can claim against regular income, but there are a few important considerations. First, make sure your expenses are ordinary and necessary for your business type - the jewelry making supplies and website would qualify, but personal items wouldn't. For tax years 2021 through 2028, there's also something called an "excess business loss limitation" that could apply if your total business losses exceed $270,000 (for single filers) or $540,000 (married filing jointly) in 2024. But this typically only affects people with very large business losses.
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Carmen Ortiz
8 After struggling with this exact situation for my photography business last year, I discovered taxr.ai (https://taxr.ai) and it was seriously game-changing. I had startup costs but no income yet, and I was confused about how to handle it properly in TurboTax. The tool analyzed my business receipts and confirmed which expenses qualified as legitimate startup costs vs personal expenses. It also helped me understand how to properly document my home office to maximize that deduction. The best part was getting clarity on how to enter everything correctly in TurboTax so my loss would flow through to offset my other income.
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Carmen Ortiz
•15 Did it help with determining if your business qualified as a real business versus a hobby? My accountant keeps warning me about the hobby loss rules.
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Carmen Ortiz
•3 I'm interested but skeptical. How exactly does it verify which expenses are legitimate? Like does it just take your word for it or does it actually review documentation?
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Carmen Ortiz
•8 It actually helped tremendously with the hobby vs. business distinction. It asked me specific questions about my business plan, profit motive, and how I operate, then provided documentation guidelines to help establish my legitimate business status in case of an audit. Regarding expense verification, it doesn't just take your word for it. You upload your receipts and documentation, and it analyzes them against IRS guidelines for your specific business category. It flags questionable expenses and explains exactly why certain items might be problematic or need additional documentation. It even helped me properly allocate mixed-use expenses like my cell phone.
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Carmen Ortiz
3 Just wanted to report back that I tried taxr.ai after seeing it mentioned here. HOLY CRAP this tool is exactly what I needed! I was so confused about my startup costs for my consulting business, but it walked me through everything step by step. The document analysis feature saved me hours of headaches - I literally just uploaded my receipts and bank statements and it categorized everything perfectly. It flagged some expenses I wasn't sure about and explained exactly how to handle them. Then it generated a report I could reference while filling out TurboTax. My NOL was accepted without any issues and I got the tax benefit from my startup expenses immediately rather than having to wait until I had income.
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Carmen Ortiz
19 If you end up getting flagged for audit because of claiming business losses with no income, getting through to the IRS can be a nightmare. After waiting on hold for 3+ hours multiple times and getting disconnected, I found Claimyr (https://claimyr.com) and it completely changed my experience. They have this callback system that somehow gets you through to an actual IRS agent without the endless hold times. You can see how it works in their demo video: https://youtu.be/_kiP6q8DX5c When I used it, I got a call back from an IRS agent in about 30 minutes when I had previously been unable to get through at all. They helped clarify exactly what documentation I needed for my business loss claim and confirmed I was doing everything correctly. Seriously saved my sanity during a stressful audit situation.
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Carmen Ortiz
•22 Wait, how does this actually work? How can a third-party service get you to the front of the IRS phone queue when I can't even get through myself?
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Carmen Ortiz
•15 This sounds too good to be true. The IRS is notorious for long wait times. Are you affiliated with this service or something? I've tried everything and still can't get through.
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Carmen Ortiz
•19 It uses a special system that continuously redials and navigates the IRS phone tree for you. Instead of you sitting on hold personally, their system does the waiting, and when it finally connects with an agent, it triggers a call to your phone and connects you directly. It's completely legit - they don't get you to the "front" of any queue, they just handle the tedious waiting process for you. I have no affiliation with them whatsoever - I was just as skeptical as you are. I found them after months of frustration trying to get clarification about my business expense documentation. The IRS phone system is absolutely brutal, and this service just handles the painful waiting part. Their demo video shows exactly how it works if you're curious.
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Carmen Ortiz
15 I need to eat crow here. After being super skeptical about Claimyr, I decided to try it anyway out of desperation. I had been trying to reach the IRS for WEEKS about documentation for my business expenses with zero income. I used their service yesterday, and I'm still in shock - I got a call back from an actual IRS agent in about 45 minutes! The agent walked me through exactly what I needed to document my startup costs and confirmed I was entering everything correctly in TurboTax. They even flagged a couple deductions I was taking that might have triggered an audit. The peace of mind was absolutely worth it. Sometimes being wrong feels pretty good!
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Carmen Ortiz
7 Make sure you have a clear profit motive for your business! I got audited last year because I claimed losses for 3 consecutive years. Had to prove I was actually trying to make money and not just writing off a hobby. Keep good records showing your intent to make a profit - business plan, marketing materials, etc.
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Carmen Ortiz
•1 How detailed does a business plan need to be to satisfy the IRS? I definitely intend to make money but I don't have a formal written plan.
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Carmen Ortiz
•7 It doesn't need to be super formal, but you should have something in writing that outlines your business concept, target market, pricing strategy, and expected timeline to profitability. Even a few pages showing you've thought through how the business will eventually make money is helpful. The IRS looks at nine factors for the hobby vs. business determination, and having a written plan addresses several of them. They want to see that you're approaching this in a businesslike manner and have a reasonable expectation of eventually making a profit, even if you're not there yet.
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Carmen Ortiz
23 Has anyone tried just putting like $1 of income instead of $0? My accountant friend suggested this makes it less likely to trigger a flag in the system while still giving you essentially the same loss deduction.
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Carmen Ortiz
•17 I wouldn't recommend that. Reporting income you didn't actually receive is technically false reporting. Better to be honest with $0 income and have proper documentation for your legitimate business expenses. TurboTax handles this situation correctly if you just follow the software prompts.
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Butch Sledgehammer
I just went through this exact situation last year with my Etsy shop! Started in late 2023 with about $3,800 in startup costs but no sales until 2024. The key thing I learned is that you absolutely CAN claim these expenses even with zero income. In TurboTax, go to the Business section and select "I'll enter my business info myself" when it asks about 1099s. Then just enter $0 for income but add all your legitimate business expenses - tools, materials, website costs, home office, etc. One important tip: make sure you can justify that this is a real business and not a hobby. Keep records of your business activities, any marketing you did, your business plan (even informal), and evidence you intended to make a profit. The IRS gets suspicious of businesses that show losses year after year with no income. Your Schedule C loss will flow through to your main tax return and reduce your W-2 income, which could give you a nice refund! Just be prepared to explain your business activities if questioned.
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Finnegan Gunn
•This is really helpful! Did you run into any issues when filing with the zero income? I'm worried TurboTax might flag it as an error or something. Also, how did you handle the home office deduction - did you use the simplified method or actual expenses?
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