Can you write off expenses even if you have a loss in the tax year?
Absolutely! The Tax Law allows a taxpayer to deduct what is termed Reasonable, Necessary and Ordinary Expense that are incurred in the production of Income.
Hence, in simple language, you can deduct all expenses that were incurred in your business. Certain expenses have to be capitalized and then amortized or depreciated depending on the character of the item that is capitalized.
Typically, Goodwill and Business Start-up expenses are capitalized and amortized over 60 months whereas other expenditures such as Fixed Assets, that are Computers, Furniture and Equipment are capitalized and depreciated from periods ranging from 5 to 7 years. All of the these expenses are either amortized or depreciated based upon IRS rules and regulations.
If the expenses were directly related to the business they are deductible. If the expenses are operational expenses such as rent, telephone or utilities, they may be deductible immediately in its entirety.
If the expenses incurred are such that they are a physical asset they are to be depreciated in the year of purchase. Also, you may be eligible to take a section 179 deduction entitling you to an immediate write-off of the item provided yo meet certain conditions.