I have start up expenses associated with a new livestock farm, but no farm income yet for the 2016 tax season. Do we need to file a schedule F for expenses?

[jaernest7]

Concerned about being audited if we show expenses with no income to count the expenses against.

[MinhT · Accepted solution]

You have started a farm business in 2016. Even if you have not yet made any sales in 2016, you can deduct start-up costs in the year you started your business.

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.

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.

You'll need to file a Schedule F for your business.

Please read this IRS document, especially the section on Business Start-up and Organizational Costs, for more information:

https://www.irs.gov/publications/p535/ch07.html

Claiming your start-up costs will result in a loss, which helps reduce your taxable income.