Will I Get a Tax Refund If My Business Loses Money?
If your business didn’t turn a profit this year, you’re not alone—and you’re definitely not out of options. One of the first questions we get from small business owner CPA clients in this position is:
“If my business loses money, can I still get a tax refund?”
The short answer? Maybe. It depends on a few important details—like how your business is set up, what kind of income you (or your household) brought in, and how the IRS treats losses for tax purposes.
Let’s break it down in a way that actually makes sense—no IRS jargon overload.
How the IRS Looks at Business Losses
First off, a business loss just means your expenses for the year were higher than your income. It happens. Startups, slow quarters, equipment investments—it’s all part of the process.
Now, when tax season rolls around, the IRS lets you report that loss on your return. But how that loss is handled (and whether it gets you a refund) really depends on your business type.
There’s also something called a net operating loss (or NOL). That’s when your deductions—across the board, not just business-related—are more than your income. If that happens, you might be able to use the loss to offset income in future years. We’ll get to that in a bit.
So… Will I Get a Tax Refund If My Business Reports a Loss?
Here’s where it really depends on your setup.
If You’re a Sole Proprietor, LLC, or in a Partnership
If you run a sole proprietorship or single-member LLC, your business taxes are filed as part of your personal return. Same goes for partnerships, where income (or losses) pass through to each partner.
So, if your business lost money, that loss might lower your overall taxable income—which could lead to a refund if:
- You or your spouse had other income (from a job, for example)
- You made estimated tax payments throughout the year
- You had federal taxes withheld
Bottom line: yes, it’s very possible to get a refund after a business loss, especially if other income sources are in the picture.
Learn more about our business tax services to see how we help clients optimize this process.
If You Have an S Corp or C Corp
This part’s a little trickier.
- S Corps pass losses through to shareholders, just like partnerships. But you need to have what’s called “basis” in the company to actually claim the loss. If you’re not sure what that means, don’t worry—that’s exactly the kind of thing a CPA helps with.
- C Corps are taxed separately. If your corporation loses money, it doesn’t pass through to you personally. But the corporation itself may be able to carry that loss forward to reduce future tax bills.
Still following? Good—we’re almost to the fun part.
Can a Net Operating Loss Get Me a Refund?
Here’s where things get interesting.
A net operating loss (NOL) kicks in when all your deductions outweigh your total income. This doesn’t just mean you had a rough year—it means you might be able to lower future tax bills. And in some limited cases, you could even apply that loss to a past year and claim a refund.
These days, though, most NOLs are carried forward, not backward. That means you can apply them to future years to offset up to 80% of your taxable income.
It’s not an instant refund, but it could lead to major savings later—especially if your business bounces back strong next year.
How to Make a Business Loss Work for You
Even if you’re not seeing a refund this year, there are smart ways in your bookkeeping to use a business loss to your advantage:
- Adjust your estimated tax payments if you’re expecting another loss next year
- Time expenses or income to maximize deductions
- Make sure you’re taking all eligible credits and write-offs
- Keep track of NOLs to apply in future years
This is also a good time to review your business structure. The way your company is set up plays a big role in how losses are handled—and whether they can actually help you on your tax return. We help clients evaluate this all the time.
Watch Out for These Common Missteps
Business losses are common, but there are a few traps to avoid:
- Combining personal and business expenses (keep your receipts clean!)
- Overstating deductions—even accidentally
- Not tracking basis if you’re in an S Corp or partnership
- Running what looks like a hobby instead of a real business
(Yep, the IRS checks for that.)
We’ve seen all of the above, and we’ve helped plenty of business owners fix them before they turn into audit issues.
Will I Get Audited If I Claim a Business Loss?
Claiming a loss won’t automatically land you in hot water. But if your return shows losses year after year—or you’re reporting large deductions without good records—it could raise eyebrows at the IRS.
This is where working with a CPA really matters. We can help you document everything correctly, avoid red flags, and make sure you’re not leaving money on the table.
FAQs: Quick Answers About Business Losses and Refunds
Will I get a tax refund if my business loses money?
Possibly! If you have other income and paid enough in taxes, a business loss could reduce your taxable income and lead to a refund.
Can I carry over my business loss?
Yes—net operating losses can be carried forward to offset future income. It’s a valuable tool if you’re planning for long-term growth.
Can I claim a business loss with no income?
You can file, and it’s still smart to do so—especially to preserve any future NOL benefits.
Do losses increase my audit risk?
Only if they’re inconsistent or poorly documented. One bad year? Totally normal. Five in a row with no clear business activity? That’s a problem.
What kind of records should I keep?
All of them—receipts, bank statements, mileage logs, payroll records. If you’d need it to prove a deduction, keep it.
What to Keep in Mind If You’re Hoping for a Refund
So, will you get a refund if your business loses money? Maybe—but it depends on the bigger picture. How your business is set up, what other income you’ve got, and how you’ve been handling your taxes all factor in.
Here’s what I tell clients: a business loss isn’t a failure—it’s a chance to reassess, plan ahead, and maybe even lower your tax bill. If you want help turning that loss into a smart tax move, we’re here for that.
Want to talk through your business loss and what it means for taxes?
Reach out to Hogan CPA. We’ll walk you through it and help you make the most of the year—no matter what the numbers look like.