Yes. They can. In fact, that's almost the definition of startup costs.
Startup costs come
from investigating the creation or acquisition of an active trade or business.
They are paid or incurred before the business opens its door.
Examples include:
- Market research
- Travel costs
- Salaries
- Consulting fees
- Accounting and legal fees
- Pre-opening advertising expenses, and
- Overhead
How these expenses
are handled:
Up to $5,000 of
startup costs paid or incurred can be deducted if the total startup costs
incurred don't exceed $50,000. An election can be made to amortize costs in
excess of $5,000 over a period of 15 years.
If total startup
costs exceed $50,000, the excess over $50,000 reduces the amount you may
deduct. For example: If you incur $52,000 worth of startup costs, you can
deduct $3,000 ($5,000 - ($52,000 - $50,000 = $2,000)) and amortize the
remaining $49,000 over at least 15 years.
Note: Cash basis
businesses may not begin amortizing these costs until the costs are actually
paid.
