Unclear on the maximum amount RETURNED from federal taxable income.

the "hypothetical" scenario:

1st year of a new service-type business

10k in Federal taxes earned as employee elsewhere

Material participation demonstrated, though service income not yet present

7k in expenses (mostly startup costs, incl. training+transit, hardware/asset used for service);

1k in profit from rental of hardware/asset (via sharing with another professional)

Please pipe up if you have the answers to the following questions! Thanks much!

(Q1) In this scenario, are the expenses, which are from my own business treated as part of the same entity: me (reported on my personal 1040+schedule C); and, (Q2) does that lower my tax liability by 7k, or does it effectively act as a tax credit of 6 or 7k? The former is nice, the latter is a game changer - and should be shouted from the rooftops. (Q3) I'm unclear about what category of business this is -- I would be acting alone, buying hardware to provide a service, but would initially be required to take classes & provide a considerable amount of free service (take off work, etc) before being recognized in such a way as to acquire fee-for-service. I am thinking it is either a sole-proprietorship or maybe I'd be consider as an independent contractor? Does it matter?

Please note that I am most concerned here about Q2 and determining my maximal return. I'm not as concerned about whether you think this passes smell test, etc (which I'm confident of) - BUT feel free to tell me I've got it all wrong, cannot do this at all, etc if you're certain and not speculating. Appreciate the help.

Cheers,
Ed