Business Start-Up Tax Deductions

Start-Up Business Tax Deductions

What Are Start-Up Costs?

Expenses incurred before your business begins operations:

• Market research
• Advertising before opening
• Training employees
• Travel related to finding a business location
• Professional fees (legal, accounting)

Tax Treatment of Start-Up Costs

• You can deduct up to $5,000 of start-up costs in your first year
• The $5,000 is reduced dollar-for-dollar once start-up costs exceed $50,000
• Remaining costs amortized over 180 months (15 years)

Organizational Costs

Costs to form a corporation or partnership (legal fees, filing fees):

• Deduct up to $5,000 in year one (same rules as start-up costs)
• Excess amortized over 180 months

When Does Business Begin?

Generally when the business is ready and available to accept customers — not when you started planning.

Pre-Opening Expenses That Are NOT Start-Up Costs

• Costs to acquire business assets (capitalized and depreciated)
• Research and development costs (Section 174)

Expenses During the Start-Up Phase

Keep all receipts and carefully distinguish between capital expenses (depreciated) and deductible expenses.

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Starting a new business? Set up your accounting and tax strategy correctly from day one.