Understand deductible start up costs for your new business

May 31, 2022

During this time of Great Resignation, we are getting a lot of calls from taxpayers who are starting new businesses. Start up costs have some unusual tax deduction strategies. Please know what you can and cannot deduct before incurring expenses only to find out there are no tax deductions available to you.

The date a business actually starts is critical in determining whether the expenses are deductible in the current year. For example, the employee wages paid to train your team before your store opens, are start up costs but after the store opens, now these are operating expenses. Retail stores are easy as there is a clear OPEN date. For service based businesses, you can be OPEN before you ever earn a Dollar. So, time to discuss with your tax advisor which is the most advantageous “opening date” for your service business.

Start up costs include:

  • Investigating the creation or acquisition of a business
  • Market analysis, product analysis
  • Training wages for employees
  • Travel costs for securing distributors/supplies/customer
  • Professional services (consultants/lawyers/accountants)

Once you have determined your START DATE and gathered an accounting of the start up costs, THEN you can choose to deduct up to $5,000 in start up costs in the year the business begins OR you may choose to spread the start up costs over 180 months from the start date.

Which is the most advantageous tax strategy for your business? Be sure to discuss this with your tax advisor.

We are so excited to see so many new businesses growing across the country. Please reach out, we would love to help you!  Find many tax deduction resources at http://www.wendybarlin.com/resources

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