Business

[kbcouch]

So there is a $5,000 business credit for start up in the first year?  I have more expenses than the $5,000 but my refund has not changed, it looks like it just gave $5,000.  Can the remainder be carried over to next year?  Is that the maximum you can get this year?

[LenaH]

Yes, you can deduct start-up costs. Startup costs come from investigating the creation or acquisition of an active trade or business. They are paid or incurred before the business opens its door.

Examples include:

 - Market research

 - Travel costs

 - Salaries

 - Consulting fees

 - Accounting and legal fees

 - Pre-opening advertising expenses, and

 - Overhead

How these expenses are handled:

Up to $5,000 of startup costs paid or incurred can be deducted if the total startup costs incurred don't exceed $50,000. An election can be made to amortize costs in excess of $5,000 over a period of 15 years.

If total startup costs exceed $50,000, the excess over $50,000 reduces the amount you may deduct. For example: If you incur $52,000 worth of startup costs, you can deduct $3,000 ($5,000 - ($52,000 - $50,000 = $2,000)) and amortize the remaining $49,000 over at least 15 years.

Please make sure you entered your startup costs in the correct area. To enter your startup costs, please follow the steps below: 

1. Open your return.
2. Search Schedule C.
3. Click on the Jump to link.
4. Click on Add a Line of Work.
5. Follow the on-screen instructions.
6. On the page titled, Your consulting Info, scroll to the bottom and click on Looks good.
7. On the page titled, Let's enter your income, click on Skip for Now.
8. On the page, First, select the expenses you know you had, click start-up costs.
9. Scroll down and hit continue.
10. Follow the on-screen instructions.
11. Click start next to Startup costs.
12. Answer yes to the question, Did you have start-up costs?
13. Follow the on-screen instructions. 

[kbcouch]

So all of my expenses would be put under Start Up costs, not miscellaneous such as paint etc.

[Vanessa A]

Correct, if you were painting walls to get ready for your opening, then this would be part of start up costs.  Basically, most the expenses (not depreciable assets like buying a building) you incur to get your business ready to open are start up costs.

[Mike9241]

it's not a tax credit.  start-up expenses are a tax deduction 

The $5,000 deduction is reduced $ for $ for start-up expenses in excess of $50,000

the amount not currently deductible is amortized over 180 months (see page 2 of form 4562) starting with the date the business commenced

[kbcouch]

It doesn't seem to matter where I put them, if I put all those expenses under startup or if I put them under Miscellaneous, it is not giving more than $5,000.  I have about $15,000 in startup/miscellaneous (paint/supplies/clothing racks/wall racks/lights/and much more), the only difference I see is that if I put it all under start up, I can get the rest spread out over 15 years.

Also, is my initial inventory considered start up, I do COGS or is it both?

[kbcouch]

Info states that you can write off $5k in startup AND $5k in allowable business expenses, but no matter which way I do it, it seems like it is only changing my refund by $5k.

[ErnieS0]

A deduction is not the same as a credit. A credit is a dollar-for-dollar reduction in tax. A deduction will only increase your refund by your tax rate. If your tax rate is 20%, then your refund will only increase by $2 for every $10 in additional expense.

If your refund is staying at $5,000 check your Total Tax in Tax Summary. If your total tax is $0, adding more expenses will not increase your refund.

To see your Tax Summary:

1. Click on Tax Tools in the left column
2. Then Tools
3. Select View Tax Summary in the center box
4. When you are done, click Back in the left column

Inventory is not a start-up cost. Enter inventory in the inventory section.