{"id":20676,"date":"2017-06-14T12:00:00","date_gmt":"2017-06-14T12:00:00","guid":{"rendered":"https:\/\/resource-center.hrblock.com\/"},"modified":"2023-08-29T08:40:28","modified_gmt":"2023-08-29T13:40:28","slug":"business-losses-taxes","status":"publish","type":"post","link":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/","title":{"rendered":"Taxes And Business Losses"},"content":{"rendered":"<h2>What is a business loss?<\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-53714 alignright\" src=\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/business-loss-300x190.jpg\" alt=\"business loss\" width=\"300\" height=\"190\" srcset=\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/business-loss-300x190.jpg 300w, https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/business-loss.jpg 500w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/>When a business entity doesn\u2019t make enough money to cover its operating expenses, this is referred to as a business loss. It happens for two reasons: operational inefficiencies or an abnormal event that disrupts business.<\/p>\n<h2>Passive activity loss limits<\/h2>\n<p>Passive activity losses are deductible up to the amount of your passive activity income. They include losses from trade or business activities you don\u2019t materially participate in.<\/p>\n<p>Rental real estate activities are always considered passive. This is true unless you materially participate as a real estate professional. An activity is a rental activity if the income generated:<\/p>\n<ul>\n<li>Is mainly from the use of property<\/li>\n<li>Isn\u2019t mainly from the performance of services<\/li>\n<\/ul>\n<h2>Passive loss deduction limit<\/h2>\n<p>Generally, taxpayers can only deduct passive activity losses from passive activity income.<\/p>\n<h2>Special loss allowances<\/h2>\n<p>You might have passive-activity losses from rental real-estate activities in which you actively participate. If so, you\u2019re allowed a special allowance based on your filing status:<\/p>\n<ul>\n<li>Single or married filing jointly \u2014 $25,000<\/li>\n<li><a href=\"https:\/\/www.hrblock.com\/tax-center\/filing\/personal-tax-planning\/claiming-married-and-filing-separately\/\">Married filing separately<\/a> and lived apart all year \u2014 $12,500<\/li>\n<\/ul>\n<p>You can deduct up to $25,000 in passive losses against your ordinary income (such as W-2 wages) if your modified adjusted gross income (MAGI) is $100,000 or less. If you are married filing separately, the special allowance is limited to $12,500 and the phaseout begins at MAGI of $50,000.<\/p>\n<h3>These special allowances:<\/h3>\n<ul>\n<li>Will be reduced by 50% of the amount of your modified adjusted gross income (MAGI) that\u2019s more than $100,000 \u2014 or $50,000 if married filing separately<\/li>\n<li>Can\u2019t be used if your income is $150,000 or more \u2014 or $75,000 if married filing separately. This is true unless you have an exception claiming low-income housing credits.<\/li>\n<li>If you lived together at any time during the year and file married filing separately, you also can\u2019t claim losses.<\/li>\n<\/ul>\n<h3>You actively participate in rental real-estate activities if both are true:<\/h3>\n<ul>\n<li>You have a 10% or greater ownership interest throughout the year.<\/li>\n<li>You make management decisions, like:\n<ul>\n<li>Approving new tenants<\/li>\n<li>Deciding on rental terms<\/li>\n<li>Approving expenditures<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3>You can deduct the lower of these from your non-passive income:<\/h3>\n<ul>\n<li>$25,000 \u2014 or a reduced amount<\/li>\n<li>Net loss from active-participation rental real-estate activities<\/li>\n<\/ul>\n<p>Losses are offset against <a href=\"https:\/\/www.hrblock.com\/tax-center\/income\/investments\/ways-to-generate-passive-income\/\">passive income<\/a> before figuring the amount allowed under this provision.<\/p>\n<h2>Do You Own a Business with a Business Loss?<\/h2>\n<p>Owning a business poses special considerations come tax time, including special filing requirements. Whether you&nbsp;<a href=\"https:\/\/www.hrblock.com\/tax-offices\/local-offices\/#!\/en\/office-locator\/\">make an appointment<\/a>&nbsp;with one of our knowledgeable tax pros or choose one of our&nbsp;<a href=\"https:\/\/www.hrblock.com\/online-tax-filing\/\">online tax filing<\/a>&nbsp;products, you can count on H&amp;R Block to help you get back the most money possible.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What is a business loss? When a business entity doesn\u2019t make enough money to cover its operating expenses, this is referred to as a business loss. It happens for two reasons: operational inefficiencies or an abnormal event that disrupts business. Passive activity loss limits Passive activity losses are deductible up to the amount of your [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":53714,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[24,50],"tags":[],"class_list":["post-20676","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-income","category-other-income"],"acf":[],"yoast_head":"<title>Learn About Taxes and Business Losses | H&amp;R Block<\/title>\n<meta name=\"description\" content=\"How do business losses affect your taxes? See if you are eligible for a special allowance and get tax answers at H&amp;R Block.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Taxes And Business Losses\" \/>\n<meta property=\"og:description\" content=\"How do business losses affect your taxes? See if you are eligible for a special allowance and get tax answers at H&amp;R Block.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/\" \/>\n<meta property=\"og:site_name\" content=\"H&amp;R Block\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/hrblock\" \/>\n<meta property=\"article:author\" content=\"https:\/\/www.facebook.com\/hrblock\" \/>\n<meta property=\"article:published_time\" content=\"2017-06-14T12:00:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-08-29T13:40:28+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/business-loss.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"500\" \/>\n\t<meta property=\"og:image:height\" content=\"317\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"H&amp;R Block\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@HRBlock\" \/>\n<meta name=\"twitter:site\" content=\"@hrblock\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"H&amp;R Block\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/\",\"url\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/\",\"name\":\"Learn About Taxes and Business Losses | H&R Block\",\"isPartOf\":{\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/business-loss.jpg\",\"datePublished\":\"2017-06-14T12:00:00+00:00\",\"dateModified\":\"2023-08-29T13:40:28+00:00\",\"author\":{\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#\/schema\/person\/0451551be86ad17708cdd08a71391fcf\"},\"description\":\"How do business losses affect your taxes? See if you are eligible for a special allowance and get tax answers at H&R Block.\",\"breadcrumb\":{\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/#primaryimage\",\"url\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/business-loss.jpg\",\"contentUrl\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/business-loss.jpg\",\"width\":500,\"height\":317,\"caption\":\"business loss\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Taxes And Business Losses\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#website\",\"url\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/\",\"name\":\"H&amp;R Block\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#\/schema\/person\/0451551be86ad17708cdd08a71391fcf\",\"name\":\"H&amp;R Block\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/08\/BlockAuthor.jpg\",\"contentUrl\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/08\/BlockAuthor.jpg\",\"caption\":\"H&amp;R Block\"},\"sameAs\":[\"http:\/\/hrblock.com\",\"https:\/\/www.facebook.com\/hrblock\",\"https:\/\/x.com\/HRBlock\"]}]}<\/script>","yoast_head_json":{"title":"Learn About Taxes and Business Losses | H&R Block","description":"How do business losses affect your taxes? See if you are eligible for a special allowance and get tax answers at H&R Block.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/","og_locale":"en_US","og_type":"article","og_title":"Taxes And Business Losses","og_description":"How do business losses affect your taxes? See if you are eligible for a special allowance and get tax answers at H&R Block.","og_url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/","og_site_name":"H&amp;R Block","article_publisher":"https:\/\/www.facebook.com\/hrblock","article_author":"https:\/\/www.facebook.com\/hrblock","article_published_time":"2017-06-14T12:00:00+00:00","article_modified_time":"2023-08-29T13:40:28+00:00","og_image":[{"url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/business-loss.jpg","width":500,"height":317,"type":"image\/jpeg"}],"author":"H&amp;R Block","twitter_card":"summary_large_image","twitter_creator":"@HRBlock","twitter_site":"@hrblock","twitter_misc":{"Written by":"H&amp;R Block","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/","url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/","name":"Learn About Taxes and Business Losses | H&R Block","isPartOf":{"@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#website"},"primaryImageOfPage":{"@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/#primaryimage"},"image":{"@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/#primaryimage"},"thumbnailUrl":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/business-loss.jpg","datePublished":"2017-06-14T12:00:00+00:00","dateModified":"2023-08-29T13:40:28+00:00","author":{"@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#\/schema\/person\/0451551be86ad17708cdd08a71391fcf"},"description":"How do business losses affect your taxes? See if you are eligible for a special allowance and get tax answers at H&R Block.","breadcrumb":{"@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/#primaryimage","url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/business-loss.jpg","contentUrl":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/business-loss.jpg","width":500,"height":317,"caption":"business loss"},{"@type":"BreadcrumbList","@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/business-losses-taxes\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/"},{"@type":"ListItem","position":2,"name":"Taxes And Business Losses"}]},{"@type":"WebSite","@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#website","url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/","name":"H&amp;R Block","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#\/schema\/person\/0451551be86ad17708cdd08a71391fcf","name":"H&amp;R Block","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#\/schema\/person\/image\/","url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/08\/BlockAuthor.jpg","contentUrl":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/08\/BlockAuthor.jpg","caption":"H&amp;R Block"},"sameAs":["http:\/\/hrblock.com","https:\/\/www.facebook.com\/hrblock","https:\/\/x.com\/HRBlock"]}]}},"_links":{"self":[{"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/posts\/20676","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/comments?post=20676"}],"version-history":[{"count":0,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/posts\/20676\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/media\/53714"}],"wp:attachment":[{"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/media?parent=20676"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/categories?post=20676"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/tags?post=20676"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}