Can I have more business expenses than the taxable income?

Forum|Forum|1 year ago
March 10, 2025
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Why does the software not allow for more business expenses than the income?

Vanessa A

Why do you say it does not allow for more expenses than income? Where is it not allowing the expenses?

No, you cannot claim more self-employed health insurance than you have profit, nor the home office deduction and your self-employed retirement contributions are limited based on your profit. So, these expenses would not be allowed if you have no income.

Yes, you can have more business expenses than income, which would create a business loss on your return. You would then see this as a negative number on your form 1040.

Reporting Self-Employment Business Income and Deductions

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m-garnandAuthor

The software no longer calculates the refund when my business expenses match the total income.

Vanessa A

Please provide more detail? You do not get a refund because your business expenses are greater than your business income.

If you were getting a refund when you had business income greater than expenses, it could be that you were getting the Earned Income Credit or another credit that was based on having income or your income. For example, if you have children, but no earned income, then you would not be eligible for the Child Tax Credit or the refundable portion which is the Additional Child Tax Credit. Before you enter the expenses, you may be getting the ACTC or the Earned Income Credit which goes away after you enter all your expenses and no longer have income.

To see what is happening, you can print out your return with the expenses entered and then remove the expenses and print it out that way and compare line by line to see why your refund is changing. This will tell you exactly what is being changed and then if you still need help, you can respond back and we can further explain why the changes are happening.

NOTE: You cannot intentionally NOT enter expenses to manipulate your income just to get a refundable credit.

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