We haven't started a business yet, but in 2015 purchased a computer & software for home office use once the business starts in 2016. When do we claim expenses on taxes?

[taxtime159]

No income earned in 2015 as business hasn't started yet. When would we claim the computer, software, etc on taxes?

[PatriciaV · Accepted solution]

Expenses incurred before your business begins may be deducted as Start-Up and/or Organizational Costs, if under a certain limit.

Per IRS Pub 535, Business Start-Up and Organizational Costs: "Business start-up and organizational costs are generally capital expenditures. However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized."

Assets, like computers and furniture, that would normally be subject to depreciation may be also be deductible if each item cost less than $2500. If you chose to take this "Safe Harbor" election, TurboTax will ask you about it under the Assets/Depreciation section under Business Expenses.

You may decide which category to use, Start-Up or Safe Harbor.

The easiest way to to find this area of TurboTax is to use the Search box at the top right side of the TurboTax header. Enter "schedule c" and click on the first result. This will take you directly to the area where you can enter your self-employment income and expenses, including both Start-Up and Organizational Costs..