The expenses of starting a business can really add up, but new owners sometimes think that because they aren’t in business yet — the expenses don’t count. You can’t deduct them on your taxes until you are actually in business (not necessarily making a money!), but keep up with them. The first $5,000 of start up expenses can usually be deducted the first year and the rest are amortized (spread out) over fifteen years. So, what are start up expenses?
Start up expenses are all of those expenses that you incur to get your business started. Consulting with CPAs and attorneys. Learning about running your business and how to set it up, marketing exploration, website and design services, the legal costs to become an “entity.” Learn about the different entities here. Setting up a new business takes a lot of running around and with today’s gasoline prices — keep a log of miles traveled. TIP – Keep up with everything, and let your tax professional sort through it.
Also, keep up with all equipment purchases, supplies, things that you will use in your business. These aren’t “start up” expenses, but can be deductible once you are actually in business regardless of when you paid for the items. TIP – Keep receipts.