<prompt> Human: For instance, I run a small business. I made considerably less than my expenses. Am I correct to assume that these expenses will not be paid back to me by the government? Keep in mind I know nothing about anything other than individual taxes. I am very new at running my business. I believe deductions are just that. Deductions from the amount of taxes I owe THEM.Google does not help me.  <response>: Deductions are not subtractions from the amount of taxes I owe them. That would be what is called a tax credit.Deductions are subtractions from the amount of income you made. They reduce taxable income. Then once you know taxable income you calculate tax. So a deduction only reduces your actual tax by a fraction of the amount of deduction.If you are a sole proprietor, and your business expenses exceed your revenue, you have a business loss. It goes on your income taxes as a negative number. Its thought of as negative income, not a deduction, but it has the same effect: it drops your income down and will reduce your taxes. But the amount your taxes go down will not equal your business loss, and the amount your taxes go down will not equal your business expenses.Example :You have W-2 income 50K. You have business revenue 6K. You have business expenses 10K. Your business profit is 4K and your adjusted gross income is 46K. Instead of tax on 50K, you owe tax on 46K. Change in the amount you will have to pay in as tax will be 25 4K, or 1K. So the drop in tax is 1K. That does not pay you back for your business loss of 4K. Nor does it reimburse you for your expenses of 10K. 