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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29571
Experience:  Taxes, Immigration, Labor Relations
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I've just learned that I earned more capital gains that I'd

Customer Question

I've just learned that I earned more capital gains that I'd predicted. So now I have about $1500 too much income in 2014 to qualify for the Obamacare premium rebate which I got all year.
However, I have a very small ceramics business, which has never turned a profit. If I file a Schedule C for that business, I might have enough ceramics business expenses to offset that $1500. Would that work? If so, it would save me nearly $6000 that I will otherwise have to repay for the Obamacare premium reduction.
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.
If you run a business - and that business generates losses - these business losses will be fully used to offset other taxable income.So your AGI will be lower - and that is used for health insurance premium credits.The issue is that your business has never turned a profit...If so - the IRS might question whether that activity is a business or a hobby.Generally - if you report business losses three years in sequence - that might be a red flag for the audit.
Customer: replied 2 years ago.
How about if I only do the Schedule C for one year? Or for only 3 years?
Expert:  Lev replied 2 years ago.
That is not an issue to use schedule C - if you have a business - and have reasonable expectations to make a profit - you perfectly may report your income and expenses on schedule C reporting your business transactions.It is possible that the business generated losses for several years - that is Ok.
Expert:  Lev replied 1 year ago.
If your activity will be treated as having your own business - you may report all business income and expenses -on the schedule C -http://www.irs.gov/pub/irs-pdf/f1040sc.pdfThe net income (after deductions) will be reported on the form 1040 line 12 - http://www.irs.gov/pub/irs-pdf/f1040.pdfBusiness expenses are the cost of carrying on a trade or business. These expenses are usually deductible if the business operates to make a profit. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary..If the business has net income over $400, it may be required to file Schedule SE, Self-Employment Taxhttp://www.irs.gov/pub/irs-pdf/f1040se.pdfand net self-employment income is subject to 15.3% self-employment tax.Self-employment taxes from schedule SE will go to the form 1040 line 57 - http://www.irs.gov/pub/irs-pdf/f1040.pdfAlso - you will deduct half of self-employment taxes on the line 27.Generally - that all you needs tax purposes.Please review all possible deductions - that might help to reduce income tax liability.You do need to keep a record your income and deduction items.Let me know if you need any help.