Business Startup costs Deduction

Elina G — Mon, 09 Mar 2026 10:49:41 GMT

I am starting a business (restaurant). For that purpose in 2021 I purchased a land and launched construction. In my 2021 tax return I'd like to deduct my business startup costs up to $5000 for advertising, travel to the construction site, contract labor. I do not elect to amortize start up costs, and my total costs do not exceed $50000.

The instructions in Publication 535 state that the startup costs deduction can be claimed in the year the business became active (p. 27):

How to make the election. You elect to deduct the start-up or organizational costs by claiming the deduction on your income tax return (filed by the due date including extensions) for the tax year in which the active trade or business begins.

Question: Can the date (the year) I purchased land for my future restaurant be considered a business startup date? In other words, can I deduct my startup costs in 2021 (when the land was purchased), though my restaurant is still being constructed? (my startup will take more than 1 year for sure before I can open doors of my restaurant)

Re: Business Startup costs Deduction

Vanessa A — Wed, 13 Apr 2022 17:23:15 GMT

No, you will not be able to deduct your start up costs until 2022 or whenever you actually open your doors.

Also, your start up costs will include ALL the costs to start the business. Land, building, equipment, advertising, etc that is stated at less than $50,000 may raise a red flag. If the costs are more than that total, you will need to amortize the costs.

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Business Startup costs Deduction

Re: Business Startup costs Deduction