The Alternative Business Calculation Adjustment (ABCA) doesn't apply to business start-up costs. It allows you to offset 4 types of business and investment income before calculating tax. You can learn more about New Jersey’s alternative business calculation here.
You can't begin deducting expenses, until you have started your business, which the IRS defines (and New Jersey follows). For example, a local store hasn't started until it's opened it's doors for business and people can come in buy things. This will look differently depending on the type of business.
Prior to actively serving or selling to customers, all business expenses are tracked as start-up costs and cannot be deducted until the month your business 'starts.' Be sure you enter your start-up costs under "start-up costs" in the software and they will be deducted according to the rules:
- Up to $5,000 can be deducted in the month your business starts (if not more than $50,000 was spent on start-up)
- Since start-up costs affect your business for years to come, their deduction (in excess of $5,000) is spread out over the following years. This is calculated by dividing the remaining start-up costs by 180 months and deducting the qualified amount each year.
