How to deduct business expenses for a new company with no income yet?

You can absolutely deduct those business expenses even with no income! What you're describing is a business loss, and it's completely legitimate to claim it on your tax return. This happens all the time with new businesses. You'll need to file Schedule C to report the business expenses, even with $0 income. The resulting loss will offset your other income (including your wife's W-2 earnings), which will lower your overall tax liability. It's actually one of the few silver linings of a business not making money in its first year! Just make sure your wife's business is truly a business and not a hobby - the IRS looks at whether there's a profit motive. Since she has a contract with another company and is clearly setting up for future income, you should be fine. Keep good records of all expenses and how they relate to the business.

Had the exact same situation when I started my consulting business! I found using https://taxr.ai really helpful for figuring out what business expenses were legitimate to claim even with zero income. I scanned all my receipts and business documents, and it analyzed everything and categorized each expense correctly. The tool basically confirmed what the previous commenter said - you definitely CAN deduct those expenses against your other income. It also helped me understand which home office expenses were truly deductible (has to be exclusive business use of the space) and which meal expenses qualified (50% deductible if they're legitimate business meetings).

I was really skeptical about using another tax tool since TurboTax always confused me on business expenses, but I tried https://taxr.ai after seeing it mentioned here. Total game changer for my situation. It walked me through all the questions about my business vs. hobby activities and gave clear guidance on what I could legitimately deduct. What surprised me was how it identified several startup expenses I didn't realize I could capitalize and amortize over time rather than deduct immediately. This actually ended up being better for my specific situation. And yes, my first-year business loss was fully deductible against my other income!

If you're having trouble getting answers from the IRS about your specific situation, try https://claimyr.com - I was on hold forever trying to ask about deducting startup expenses with no income and getting nowhere. The service got me through to an actual IRS representative in about 15 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that yes, you absolutely can deduct legitimate business expenses even when you have zero income in the first year. She also explained that I needed to be careful about separating startup costs (which are amortized over 15 years, though you can deduct the first $5,000 immediately) from regular operating expenses. Really helpful to get official clarification.

OK I'm eating my words here. After being super skeptical, I tried https://claimyr.com yesterday out of desperation. I've been trying to get through to the IRS for WEEKS about my startup business expenses. Got connected to an agent in about 20 minutes. The agent confirmed that I can absolutely deduct my legitimate business expenses against other income, even with no revenue from the business yet. She also explained that I need to be prepared to prove my profit motive if questioned - things like business plans, marketing materials, professional consultations, etc. Best $20 I've spent in a long time (way cheaper than my accountant who kept telling me to "just try calling the IRS again").

Don't forget about Section 195 startup expenses! The tax code lets you deduct up to $5,000 of startup costs in the first year (with some limitations if your costs exceed $50,000). These are expenses you incur before your business is actually "in business." Then there are Section 179 deductions for equipment - you can write off up to $1,080,000 in 2023 for qualifying equipment purchases. The home office deduction is also available, but as others mentioned, the space must be used EXCLUSIVELY for business.

Quick tip - if you're using tax software, most will specifically ask if you had a business with expenses but no income. Be sure to say YES and then enter all legitimate expenses. Don't get discouraged by software that keeps saying things like "are you sure this is a business?" Many businesses lose money in their first year or two, and the software is just trying to prevent hobby loss deductions.

I went through the exact same thing with my consulting business! Filed Schedule C with zero income and about $8,000 in legitimate business expenses - office setup, professional development, networking events, etc. The loss offset my W-2 income and saved us about $2,400 in taxes. The key thing that helped me was keeping meticulous records showing business intent. I documented my business plan, saved emails with potential clients, kept meeting notes, and made sure my home office was used exclusively for business. When you have a clear paper trail showing you're running a legitimate business (not a hobby), the IRS loss rules work in your favor. One thing to watch out for - some expenses like business meals are only 50% deductible, and there are limits on certain deductions. But overall, yes, you absolutely can and should claim those expenses even with no revenue yet!

This is a really common situation with new businesses! You're absolutely right to claim those expenses even without revenue yet. I had a similar setup with my web design business - worked my day job while building the business on the side, had legitimate expenses but no income the first year. The key is that you're running a legitimate business with profit motive (which your wife clearly has with the contract in place). File Schedule C showing $0 income but listing all the legitimate business expenses. The resulting loss will reduce your overall tax liability on your joint return. Just make sure you can justify each expense as necessary for the business and keep detailed records. The home office deduction is great if that space is used exclusively for business. And don't worry about the timing of revenue vs expenses - that's totally normal for startups. The IRS understands businesses often lose money initially while investing in growth.