I have only 4 years to retire. My mortgage is paid and have just some Employee Business Expences that I deduct and Property tax . However that will probably not be enough this year for my the usual Schedule A deductions which I deducted interest on mortgage in the past that in the past lower my tax bill.
I have started a tree nursery and have invested quite a bit of money to start. What do I need to do to make this a legal business so I can deduct my startup loses during the first year or two?
This little business will hopefully be my extra income after retirement.
Thank you in advance.

jshook

If you are receiving income from the business, it has met all the requirements for being a "legal" business in the eyes of the IRS. There is no IRS requirement to have a business license.

Even if you have not received any income, if you are doing all the things that a business would normally do (soliciting customers, advertising, buying business equipment, etc.), then you are in fact running a business and can start deducting expenses on a Schedule C on your tax return.

Now, once you establish your business, the IRS expects you to eventually show a profit. The general rule is that a profit must be shown in three of the first five years of business. However, that rule is NOT edged in stone.

Many businesses experience heavy competition and require a number of years before they show a profit. As long as you are conducting your business as a business and are making progress towards the profit goal, the IRS will probably not challenge your deductions.

Show too many years without a profit, however, and the IRS may rule that your "business" is in fact a hobby and then will disallow your losses all the way back to your first tax return. That is NOT a pleasant experience!