You'll be able to deduct or
amortize those start-up costs once the business is open If you don't plan on opening the business, then the deduction for these expenses is lost. Please read on
for more information from the IRS.
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. For information about amortizing start-up and organizational
costs, see chapter 8.
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. However, for start-up or organizational
costs paid or incurred before September 9, 2008, you may be required to attach
a statement to your return to elect to deduct such costs. If you timely filed
your return for the year without making the election, you can still make the
election by filing an amended return within 6 months of the due date of the
return (excluding extensions). Clearly indicate the election on your amended
return and write “Filed pursuant to section 301.9100-2.”
File the amended return at the same address
you filed the original return. The election applies when figuring taxable
income for the current tax year and all subsequent years. Once made, the
election is irrevocable. For more information on start-up and organizational
costs, see chapter
8.
