I started my business late last year , no income yet. Can I deduct my business expenses?

[rwangwendy]

I did some research online, looks like it is OK to deduct the expenses when your business just get started and you don't have income yet. However, Turbo tax does not allow me to enter my expenses unless I have business income.  What can I do about it?

[PeterM · Accepted solution]

Business start-up and organizational costs are generally capital expenditures. However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized.

Start-up costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business. Organizational costs include the costs of creating a corporation or partnership.

How to make the election.   You elect to deduct the start-up or organizational costs by claiming the deduction on your income tax return (filed by the due date including extensions) for the tax year in which the active trade or business begins. For costs paid or incurred after September 8, 2008, you are not required to attach a statement to your return to elect to deduct such costs.

Turbo Tax will let you enter the expenses without having entered any income. Just continue past, or skip the income part altogether.

[brett1]

Can this be deducted on the Personal income taxes or is this on the business taxes?

[Cera10682]

@PeterM Would I also then need to include any capital investments that I had made last year? Even though I didn't receive any capital gains? If I didn't include that, on accident, would I get in major trouble? Or go to jail? I'm so worried and freaking out that I forgot to add that to my taxes. They already calculated my refund and all that and I've already received my state and just waiting for my federal.