Author Topic: Advantages to a non-income generating business?  (Read 1056 times)

kenmoremmm

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Advantages to a non-income generating business?
« on: November 26, 2019, 01:28:00 PM »
because my wife and i use a nanny and pay taxes on the nanny, we have had to set up an EIN and all that jazz.

while the business does not generate income (not eligible for solo 401k) one benefit i found is for credit card churning and business card availability.

what other loopholes, tax advantages, etc are out there that are low hanging fruit?

Financial.Velociraptor

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Re: Advantages to a non-income generating business?
« Reply #1 on: November 26, 2019, 02:56:17 PM »
For federal tax purposes there are none.  If you don't report a profit in 3 out of 5 years on schedule C the service can and will reclassify your "business" as a "hobby" and disallow (retroactively) all your deductions. 

Some businesses that have long payback periods, especially speculative real estate and some farming (orchards that do not produce fruit for several years), have won in court when challenging the 3 out of 5 years ruling when it was clear to the judge or jury there was a profit motive that just needed a planning horizon greater than 5 years.