How to Write Off a Business Investment Loss

How you report a business investment loss is determined by the type of business.
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Any time you invest your money in a business, you take a risk, and if that risk results in a loss, you can claim the loss on your income taxes. Claiming a business investment loss on your income taxes will decrease your taxable income and result in you owing less tax. How you claim an investment loss depends on whether the business was a sole proprietorship or a partnership. Sole proprietors report the loss on their own personal income tax return. Taxpayers who invest in a partnership report the loss on a business tax return, which is separate from the taxpayer's personal return.


Step 1

Download Form 1040 and Schedule C IRS website if the business is a sole proprietorship. If the business is a partnership, download Form 1065.

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Step 2

Complete Schedule C to calculate your loss if the business is a sole proprietorship. Report the total loss in the line labeled "Business Income or Loss" on Form 1040.


Step 3

Complete Form 1065 if the business is a partnership. You must provide information on the business's income and deductions. You must also provide data from the business' balance sheet and an analysis of your partners' capital accounts.


Step 4

Sign and date the income tax return. If you had to complete additional forms, attach the forms to the back of the tax return in sequence by the form number. Attach any W-2s to the front of your return.

Step 5

Mail the tax return to the address listed on the Form 1040 or Form 1065 instructions.



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