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dionwisn

marketing expenses

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Are marketing expenses a tax write off for an L.L.C.?

I SPENT OVER $1,000 IN MARKETING AND HAVEN'T SEEN ANY RETURN ON THESE FIGURES;however i used turbo tax for small business this may be why. any advice on how to maximize this return would be great.

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Last year, your company incurred more expenses than revenues, resulting in a negative taxable income. You had what is called a net operating loss (NOL).

 

A net operating loss for the company can generally be used to recover past tax payments or reduce future tax payments. The reasoning behind this is that because corporations are required to pay taxes when it earns money, it deserves some form of tax relief when it loses money.

 

If a company has a net operating loss, it can apply this tax relief in two ways or through a combination of both. The company can apply the net operating loss to their past tax payments and receive a tax credit. This won't apply to you this year because you were not in operation in a prior year and did not have any taxable income from business operations.

 

It could also apply the net operating loss to future income tax payments, reducing payments they need to make in future periods. It does not make sense that you should have to pay tax before you get "out of the hole". For example, say you lose $1 million in your first year of business and make $5 million the next year. It wouldn't be fair for you to have to pay tax on a profit of $5 million, because you are really only ahead by $4 million ($5 million profit - the $1 million loss).

 

So, as a general rule, business income is taxable in the year in which it is earned, but net operating losses are either carried forward (7 - 10 years) or carried backward (2 to 3 years). Even though you had a net operating loss for the year, you do not report a negative taxable income on your tax return and do not get to reduce the amount of other ordinary income subject to taxes.

 

I suspect TurboTax Business got it right.

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In other words since I broke even there is no write off for marketing expenses.

I though that if you own a real-estate L.L.C. you can write off any marketing expenses.

So, either I try and make more income next year or I reduce my marketing expenses.

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