Tax Income/Deductions Question

[TheGoodLife]

OK, so obviously it is pretty common to claim more than your income when first starting out. My question would be- if I make X amount of income, once my deductions hit that same amount does it make a difference, tax wise? (If I make $6000, once my deductions hit $6000 does it all even out? Or if I have $8000 in deductions, does it increase a refund amount?)
I hope that makes sense!

[TomCopeland]

Business loss

The answer depends on your personal situation. Let's say you made $6,000 in income and had $8,000 in business deductions. First, you can't claim house expenses that create or increase a loss. So, if you had $6,000 in Schedule C expenses and $2,000 in Form 8829 expenses, you would roll over the 8829 expenses to next year. In the end you would show a zero profit.

If you had $8,000 in Schedule C expenses you would show a loss of $2,000. This loss would reduce any personal income you or your spouse had (wages, interest income, etc.). So, the higher the loss the more personal income you can wipe out. If you don't have any personal income you won't get any further tax benefit.

[TheGoodLife]

The answer depends on your personal situation. Let's say you made $6,000 in income and had $8,000 in business deductions. First, you can't claim house expenses that create or increase a loss. So, if you had $6,000 in Schedule C expenses and $2,000 in Form 8829 expenses, you would roll over the 8829 expenses to next year. In the end you would show a zero profit.

If you had $8,000 in Schedule C expenses you would show a loss of $2,000. This loss would reduce any personal income you or your spouse had (wages, interest income, etc.). So, the higher the loss the more personal income you can wipe out. If you don't have any personal income you won't get any further tax benefit.

Thanks, Tom!