Business & farm
So if you did no business at all in 2024, but in 2024 you bought supplies so you could operate in 2025, then these would be considered start up costs. When you check the box in TurboTax that says you started or acquired this business in 2025, you will then be asked for your start up costs. This is where you will enter the cost of the supplies you purchased in 2024 and any other start up expenses you have. If your total supplies and other start up costs in 2024 were $5,000, then you would enter $5,000 and this would be fully deducted on your 2025 return as start up costs.
Start up costs can be deducted in full up to $5,000 in the first year of business and then they are amortized over the next 180 months for the rest of the amount over $5,000. For example, if you spent $20,000 on those supplies in 2024 then you would deduct $5,000 in 2025 as start up costs and then spread the other $15,000 out over the next 180 months.
So the information above will be relevant to you in future tax years...if you purchase supplies in 2025 (assuming you are operating the business in 2025 and the future), then you would include the supplies you buy on your 2025 return even if you don't use them until 2026 if you are not using an inventory method. This is how the cash method of accounting works. When you put cash out, you deduct it as an expense. When you bring cash in, you are taxed on it. It may not match up with the supplies coming and going, but it does match with the cash coming and going. So if in 2025 you spend $10 for the item, you will get that deduction in 2025. Then you will be taxed on the $20 in 2026 but in the end when you combine it you are still only taxed on $10 because it decreased your profit from 2025 for that $10.
If in 2025, after you are operating your business, if you purchase $3,000 in supplies and do not sell any of it, then you would still deduct it on your 2025 return. This may create a loss on your return if you spend more than you take in. When you are a small cash operating business that does not keep an inventory method, it is all about cash in, cash out, it is not about the individual item.
"Business startup costs. If your business began in 2024, you can elect to deduct up to $5,000 of certain business startup costs. The $5,000 limit is reduced (but not below zero) by the amount by which your total startup costs exceed $50,000. Your remaining startup costs can be amortized over a 180-month period, beginning with the month the business began"
