If I bought equipment for a photography business in 2018 but didn’t open LLC until 2019 can I still deduct those expenses by refiling 18 taxes or including them in 19?

[Rick19744 · Accepted solution]

Expenses incurred prior to starting your business are capitalized as:

1. start-up costs - Section 195
2. organizational costs - Section 709
3. fixed assets - not depreciated until placed in service for their intended use.  Can't be in service if the business has not begun its operations.

Your equipment falls into the last item.  In 2019 you have several choices; bonus depreciation, regular depreciation or Section 179.  Each may have its own merits, but needs to be determined based on your specific facts.

[aduarte0915]

Okay thanks. I also got married and started the photography partnership LLC ... which product allows us to do joint personal and business taxes in one ?

[Rick19744]

You state the business is a partnership LLC.

Is this a multi-member LLC?

What state are you a resident of?

[aduarte0915]

Yes multi member (husband and wife only) and in Ohio

[Rick19744]

Based on your response:

1. Since you are a multi-member LLC, there is not one product that will handle all your tax needs
2. For your multi-member LLC, you will need to use TT Business.  This is only available as a download and only for windows environments.https://turbotax.intuit.com/small-business-taxes/  Make sure you download the correct product year.  Based on the limited information, you most likely do not have a 2018 form 1065 tax return filing since you did not begin business until 2019.
3. Once you have completed the business return (form 1065) you will use the K-1's to complete your personal tax return (form 1040).  Check out the intuit home page to determine which product best suits your needs.  There are numerous options for both download and online.
4. Multi-member LLC tax returns can be complicated, especially the initial year.  I would recommend that you consult with a tax professional at least for your initial year to get started on the right path and help you understand the nuances of partnership tax.
5.  

[aduarte0915]

Thank you for your time and response! Do you think the “live” product where I can access a CPA would suffice for questions my first year or think I actually need to hire someone? We don’t have any income just deductions. 

[Rick19744]

I don't have any experience with the "live" option.

You indicate that you only have expenses.  You need to make sure that you can convince the IRS (should you win the audit lottery) that you actually have begun business even though you don't have income.  Having expenses and no income may be a red flag within the IRS.

So having a discussion with a tax professional to build your support for actually having begun business will be key.  You need to have this information now and maintain it should you be asked to "prove" that you began your business.

I am not sure that a "live" TT individual would provide that level of support; however, I honestly don't know that answer.

[Carl]

Expenses incurred prior to the business being "open for business" are start up expenses. It does not matter in what year the expenses were incurred either. It's not uncommon for a new business to have 3 years of startup expenses prior to opening. Startup expenses are claimed as such, in the first year the business is actually "open for business". You can claim and deduct a maximum of $5000 in startup expenses in that first year. Any remaining startup expenses are amortized (not capitalized) and deducted over the next 15 years.

The only things that are not startup expenses, would be assets. Assets are those structures (real estate) and equipment used on a recurring basis to produce income. Such expenses are listed as business assets in the Business Assets section and they get capitalized (not amortized) and deprecated over time. The number of years of depreciation depends on the class of the asset. For most photography equipment, it's 5 years.  You'll be asked for when you purchased the equipment and it does't matter if it was 5 years before the business was open. Then you'll be asked when you placed that equipment "in service". The in service date can not be a date before you were "open for business". Depreciation on the asset starts on the in-service date.