How to list startup costs for a business

Start-Up Expenses are reported in aggregate - one amount equal to the total of all expenses incurred. For active business activities, these costs are entered either under Assets/Depreciation or under Business Expenses depending...

Per IRS Pub 535 Business Start-Up and Organizational Costs: "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."

Hi,  

I've entered my business startup cost and fall into the over $5000 category.  Is this money going to be used to offset income only?  It doesn't seem to reduce my tax liability, right?

Thanks,

Todd

Assuming that your start-up costs are less than $50,000,

• You may deduct the first $5,000 in start-up expenses against current income. 
• The portion over $5,000 would be amortized over 15 years, so a portion of this amount would also offset current income.

Expenses paid or incurred after October 22, 2004: 

• You can deduct up to $5,000 in startup and $5,000 organizational costs as current expenses if the costs are under $50,000, respectively.
• You can choose to amortize startup and organizational costs greater than $5,000, respectively, (but less than $50,000, respectively) over a period of 15 years.
• If your startup or your organizational costs are more than $50,000, respectively, the excess amount reduces the amount you can deduct.

See TurboTax Best Answer.

@BiggyFig

[Edited 02/28/2021 8:31 AM PST]

This is great. my only question is. where do I find the "assets/depreciation as a capital asset for amortization" in turbotax?

Start up costs have a 15 year (180 month) recovery period using amortization (an equal amount for each month). The amortization is under the Assets expense for your business and you must select to 'Add an asset' once you reach the Business Asset Summary page.

1. Select Intangibles, Other property on the Describe This Asset page.
2. Select Amortizable intangibles on the Tell Us a Little More page
3. Type Start up Costs as the description, then the cost remaining to be amortized and the date you opened for business
4. Code selection is 195 Business Start Up Costs
5. Enter 15 years for the Useful Life (in Years)

@zamacona1

Hey Diane, 

thank you so much for such a prompt response, super helpful and detailed!

I've done this as you mentioned. So next year that I do my taxes, will turbo tax already have this amortization automatically accounted for? or is there anything else that I would need to do in the future in order to account for this?

Thank you so much for your help!

Next year, you should be able to receive an amortization schedule transfer over into next year's return. Just to be cautious however, I would keep a copy of this year's schedule in your return just in case the transfer did not take place.

@zamacona1

Okay got it. So it should be stored and automatically transfer next time within my turbo tax account and I’ll keep a copy of my return this year in case there’s any issues. 

thank you 

I realize this original question is quite old, but for any future readers ... training to start a new professional is not deductible, and therefore would not be part of startup costs.

Hi, @DianeW777 / @DaveF1006 

Where do you enter this if you're filing with turbo tax business (partnership llc)? I tried entering under business start up cost summary page but it keep stating that since this is not the first year i'm filing tax it wont' let me enter it there. The only way I can enter this is by add this expense under my rental properties or create entirely new asset. Doesn't seem right to nest this under a rental property and if I create a new asset, it ask me for address and treats this as a rental property. 

I'm assuming you are referring to the remainder of the amortization after you previously claimed the startup on your previous return.  To enter the amortization you will follow these steps in TurboTax Business:

1. Under the Assets expense for your business and you must select to 'Add an asset' once you reach the Business Asset Summary page.
2. Select Intangibles, Other property on the Describe This Asset page.
3. Select Amortizable intangibles on the Tell Us a Little More page
4. Type Start up Costs as the description, then the cost remaining from previous return to be amortized and the date you opened for business
5. Code selection is 195 Business Start Up Costs
6. Enter 15 years (if this is not the first year you will list the remaining years showing on your previous return) for the Useful Life (in Years)

@jc152 

hi@BrittanyS  thanks for the prompt reply. 

For the life of me I can't find Business Asset Summary page? Is it under business info -> about your business -> rental real estate property summary? When I enter a new assets here it needs and address and it shows up as a rental property. 

You can get to the asset entry page by following these steps in TurboTax Business Desktop:

1. Click Federal Taxes
2. Click Deductions
3. Click Yes for "Did you buy, or do you already own, any depreciable assets related to this business?"
4. Click Add An Asset
5. Enter the information for each asset using your prior year return

@jc152 

hi @BrittanyS 

I'm been at that screen so many times but I can't find what you have... are you missing a few more steps?  See my screenshot below.. and i'm using turbotax business download  version.

1. Click Yes for "Did you buy, or do you already own, any depreciable assets related to this business?"

I have it right here

Interesting that Rental Real Estate Expenses appear here. Did you enter any information for any rental real estate?  In an earlier screenshot that you presented, you were in the Business Information tab/ Rental Real Estate Property Summary.

If you entered information there, then you might want to click on Rental Real Estate/Rental Real Estate Assets like this

And see where that takes you. I am not sure what kind of business you have.

Hi @AbrahamT ,

See below on my business info ;

Did you enter any information for any rental real estate? Yes, and I do not want to add the start up of the LLC cost to the real estate property since it's not pertaining to the individual property but rather the LLC itself. My previous CPA listed it as an amortized expense for the llc and not the individua real estate. If I want to isolate that expense seem like only way is to create another dummy real estate assets and then add that expense there but the issues is that it'll consider this as another real estate property. 

there is a section under federal taxes -> deduction called start up cost but it wont' let me enter anything because 2022 is not my first tax year. The LLC was created a few years ago.

I was able to enter it in just fine

See here

And then

You see, I was able to pick up startup costs from 2019. 

@AbrahamT right.. but I've never used turbotax business until this year. In your case if i'm understanding correctly you entered the startup cost in 2019 tax year and this year (2022) you were able to update it?

I've did another test and create a dummy LLC tax and seems like if you do not use turbotax to enter your start up cost when you first create the company, you can't add it if you use turbotax afterwards.

Is there a way for us to file a bug request?

I did this on a brand new 2022 return and I was still able to include the earlier startup costs from 2019.

See here

@AbrahamT K this is definitely a bug. I create a new tax return and stated the llc formed in 2019 and then I was able to go directly to deduction and see the startup cost entry. I was able to enter the cost and back date it back to the date I formed the LLC. Then I removed the start up cost entry and save it and then I get that msg again ( the topic does not apply to you since you indicated that 2022 is not your first tax year).

Once you remove it, you can't add it back w/o having to create a brand new tax return. 😠

I have entered just fine. Just to reiterate . You started the business in 2019 as opposed to 2022 and you want to include the startup costs as of 2019, right? .  Before, I was under the impression that you started the business in 2022 and I originally gave you the illustration as such; business started in 2022 and startup costs in 2019. So now, I presented the scenario with the business being started in 2019 as well. Anyway you slice it, I'm still able to include the startup costs. I'm not sure why you want to remove the startup cost entry, though. See these illustrations.

I simply went into Federal Taxes/ Deductions and then Startup costs. It's in.