• Skip to content
  • Skip to primary sidebar

Header Right

  • Home
  • About
  • Contact

Archives for June 2019

Business Start-Up Costs — What’s Deductible?

June 13, 2019 by Dana Lee CPA LLC Team

Launching a new business takes hard work — and money. Costs for market surveys, travel to line up potential distributors and suppliers, advertising, hiring employees, training, and other expenses incurred before a business is officially launched can add up to a substantial amount.

The tax law places certain limitations on tax deductions for start-up expenses.

  • No deduction is available until the business becomes active.
  • You may deduct up to $5,000 of accumulated start-up expenses in the tax year in which the active business begins. You have to reduce this $5,000 limit (but not below zero) by the excess of total start-up costs over $50,000.
  • Any remaining start-up expenses, you may deduct them ratably over the 180-month period beginning with the month in which the active business begins.

Example:

Gina spent $20,000 on start-up costs before her new business began on July 1, 2019. In 2019, she may deduct $5,000 and the portion of the remaining $15,000 allocable to July through December of 2019 ($15,000/180 × 6 = $500), a total of $5,500. She may deduct the remaining $14,500 ratably over the remaining 174 months.

Instead of deducting start-up costs, a business may elect to capitalize them (treat them as an asset on the balance sheet). Deductions for “organization expenses” — such as legal and accounting fees for services related to forming a corporation or partnership — are subject to similar rules.

You can find out more information about the destructibility of start up and organizational expenses in IRS Publication 535, Business Expenses.

If you opened or thinking of opening a new business and have questions about what expenses you can deduct, how you should set up your entity for tax purposes, how to set up your QuickBooks, how to use QuickBooks, what other reporting might be involved, such as payroll reporting, sales tax reporting, we are here to help. Give us a call!

Filed Under: Tax Regulations

Primary Sidebar

Search

Archive

  • May 2022
  • December 2021
  • November 2021
  • September 2021
  • July 2021
  • June 2021
  • February 2021
  • January 2021
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017

Categories

  • Business
  • Hurricane Harvey
  • QuickBooks
  • S Corporation
  • State
  • Tax Regulations

Copyright © 2019 · https://www.danaleecpa.com/blog