Daryl1
New Member

Can business expenses be deducted if the business folds without ever earning money?

If a self-employed business made no profit, can its business expenses be deducted from personal income? The business has folded and will never make a profit in future years to claim those expenses against. 

Self-employed

You can choose to include your expenses by completing the Self-Employment section of TurboTax. If your business expenses exceeded your income, you will have a business loss. This is a Non-Capital Loss and can be applied to other types of income (or carried forward if you didn't have any other income in 2018).

Note: You cannot continue to write off business expenses against personal income year after year for many years. The expectation is that your business "has a reasonable expectation of profit", according to the Canada Revenue Agency (CRA), and therefore will eventually generate more income, reduce losses, and become profitable.  If the CRA decides that this is not the case they can not only deny your claim for business losses in the current year but re-assess your claims for losses in previous years. 

You should take caution if your loss from the business was incurred in a short period of time and is a large one. If CRA questions you on it, you'll need to be able to prove that you were in business with the intention of earning a profit. 

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