Startup Deduction Timing

[Brutalm00se]

Hello, I started my small business as a sole prop in May 2020. I understand I can deduct certain startup costs. How far back can these startup costs go? The beginning of the same calendar year? 2 years? 20 years?

[Mike9241]

 section 195 start-up costs

(1)Start-up expenditures
The term “start-up expenditure” means any amount—
(A)paid or incurred in connection with—
(i)investigating the creation or acquisition of an active trade or business, or
(ii)creating an active trade or business, or
(iii)any activity engaged in for profit and for the production of income before the day on which the active trade or business begins, in anticipation of such activity becoming an active trade or business, and
(B)which, if paid or incurred in connection with the operation of an existing active trade or business (in the same field as the trade or business referred to in subparagraph (A)), would be allowable as a deduction for the taxable year in which paid or incurred.

no time span is specified.  however, the farther back in time the harder it would be to prove that these are indeed startup costs for your present business.

[ColeenD3]

Start-up costs are expensed the first year of the business.

Start-up costs are those expenses incurred in planning and setting up the business, costs you incur before you open the door.

A portion of startup and organizational costs can be expensed (written off in your first year). The remainder can be amortized (written off over a period of 15 or more years).

Here is how it works:

Expenses paid or incurred after October 22, 2004: 

 - You can deduct up to $5,000 in startup and $5,000 organizational costs as current expenses if the costs are under $50,000, respectively.

 - You can choose to amortize startup and organizational costs greater than $5,000, respectively, (but less than $50,000, respectively) over a period of 15 years.

 - If your startup or your organizational costs are more than $50,000, respectively, the excess amount reduces the amount you can deduct.

.

Note: A cash-basis business cannot deduct or write off (amortize) these costs until they are actually paid.

[Brutalm00se]

One of you says I can only do it in the first year, the other says I can do it forever.

[KrisD15]

Actually they both are saying the same thing. 

the wording on the second answer may be confusing, she says

"Start-up costs are expensed the first year of the business."

That is true, you can only CLAIM THEM the first year you file for that business.

The first answer says:

"no time span is specified. however, the farther back in time the harder it would be to prove that these are indeed startup costs for your present business."

That is true, the expenses you CLAIM THE FIRST YEAR can be expenses you paid in previous years. 

The amount of time between paying these expenses and the first year you file needs to make sense.