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Hav3y
New Member

Started a new business in November. Can I write off expenses? No income yet

Hello. I had a question about my taxes for this year.

I started a business in November (a LLC). I have not begun to generate revenue as of yet, but I do have a ton of start-up expenses. I was curious if those expenses could be written off for this tax season or do I have to wait until I begin generating revenue. Obviously, the start up cost was pretty significant, so not entirely sure the best way to approach this for this tax season.

Any help would be appreciated! Thanks so much.

- Justin

1 Best answer

Accepted Solutions
tagteam
Level 15

Started a new business in November. Can I write off expenses? No income yet

With respect to  start-up or organizational costs, you start deducting those costs after you are officially open for business. 

 

With respect to business assets you might have purchased, you start recovering those costs when the assets are place in service.

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2 Replies
tagteam
Level 15

Started a new business in November. Can I write off expenses? No income yet

With respect to  start-up or organizational costs, you start deducting those costs after you are officially open for business. 

 

With respect to business assets you might have purchased, you start recovering those costs when the assets are place in service.

View solution in original post

Mike9241
Level 6

Started a new business in November. Can I write off expenses? No income yet

if you actively began your business - example took action to get customers. you can write off post-opening expenses. pre-opening expenses are subject to IRC section 195

the taxpayer shall be allowed a deduction for the taxable year in which the active trade or business begins in an amount equal to the lesser of—
(i)the amount of start-up expenditures with respect to the active trade or business, or
(ii)$5,000, reduced (but not below zero) by the amount by which such start-up expenditures exceed $50,000, and

the remainder of such start-up expenditures shall be allowed as a deduction ratably over the 180-month period beginning with the month in which the active trade or business begins.

 

example start-up costs incurred of $54,000 then $1000 deductible 1st year the balance amortized over 180 months 

 

“start-up expenditure” means any amount—
(A)paid or incurred in connection with—
(i)investigating the creation or acquisition of an active trade or business, or
(ii)creating an active trade or business, or
(iii)any activity engaged in for profit and for the production of income before the day on which the active trade or business begins, in anticipation of such activity becoming an active trade or business, and
(B)which, if paid or incurred in connection with the operation of an existing active trade or business (in the same field as the trade or business referred to in subparagraph (A)), would be allowable as a deduction for the taxable year in which paid or incurred.

 

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