No, software companies do not have a different set of tax rules.
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. 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.
Qualifying costs.
A start-up cost is amortizable if it meets both of the following tests.
- It is a cost you could deduct if you paid or incurred it to operate an existing active trade or business (in the same field as the one you entered into).
- It is a cost you pay or incur before the day your active trade or business begins.
Start-up costs include amounts paid for the following.
- An analysis or survey of potential markets, products, labor supply, transportation facilities, etc.
- Advertisements for the opening of the business.
- Salaries and wages for employees who are being trained and their instructors.
- Travel and other necessary costs for securing prospective distributors, suppliers, or customers.
- Salaries and fees for executives and consultants, or for similar professional services.
Nonqualifying costs.
Start-up costs Don't include deductible interest, taxes, or research and experimental costs.
Organizational costs include the costs of creating a corporation or partnership.
Examples include:
- The cost of temporary directors
- The cost of organizational meetings
- State incorporation fees
- The cost of legal services
