You will list it under start-up costs in TurboTax Business.
When you start a new business by buying a franchise, the Internal Revenue Service lets you recover all of your startup costs, but the agency will make you spread most of them over time. Your initial franchise training fees are combined with all of your other franchise startup costs and generally must be amortized over 15 years.
The tax code classifies initial franchise fees as "Section 197 intangibles," after the section of tax law that applies to them. You cannot immediately deduct the full cost of Section 197 intangible as a business expense. ... In other words, you'll be able to deduct the expense, but not all at once.
All of the costs you incur in starting your new business are deductible. These include your franchise fees and your training fees. The one exception to this would be if you spent money to investigate an opportunity, then decided not to open the business. The IRS considers these expenses to be part of your personal decision-making process and won't let you write them off.
Travel Costs
If you engage in any travel as a part of your franchise training, most of those costs are also tax deductible. You can write off your transportation and lodging expenses provided they are not extravagant. The IRS also lets you write off half of the cost of your meals while you are at training. Your travel costs need to be combined with your training fees and other startup costs and amortized. You can't write them off directly as travel expenses.
Startup Allowance
The IRS allows you write off up to $5,000 in startup costs in the year that you incur them as long as your total startup expenditures don't exceed $50,000. You can use this write-off to deduct your initial franchise training fees if you want. The IRS limits your ability to use this deduction, though. The $5,000 write-off is reduced by $1 for every $1 of startup costs over $50,000, so if you spend $55,000 or more, you won't be able to claim it at all.
Amortizing Expenses
Any startup costs that you can't deduct need to be amortized, which is similar to what you do with depreciation. The IRS assigns a 15-year life to business startup costs, so you'll be able to write off your initial franchise training fee in 15 equal installments. If your franchise has a shorter life than 15 years, an accountant may be able to help you either accelerate your amortization or claim a large lump sum in the franchise agreement's last year.
How to enter start-up costs in TurboTax Business
