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Business Deductions
My son started a business out of his home in 2024. He's purchased materials and supplies for the business, but didn't have any revenues. Can he deduct these expenses on Schedule D of his tax return?
LindaS5247Answer
Alumni - Intuit
Mar 25, 2025 9:28 PM UTC
He will do this on Schedule C of his tax return. When he completes his Schedule C, he will have the option to deduct start up expenses.
He shouldn't file business taxes with no income, if he wasn't actively engaged in a trade or business or he was just preparing to begin his business.
If he was actively engaged in his trade or business but didn't receive income, then he should file and claim his ordinary and necessary business expenses.
Start-up costs are deductible. They can include the costs of training staff, legal fees, advertising costs and establishing vendors and suppliers.
Most start-up expenses are treated as capital costs for tax purposes. The IRS considers them long-term assets because you are investing in the future of your business. Generally you need to depreciate them rather than deduct their cost in the year they’re purchased.
If he anticipates showing a loss for the first few years, he should consider amortizing the deductions to offset profits in later years. This would require filing IRS Form 4562 in his first year of business.
Some costs don’t qualify as start-up expenses, such as equipment.
Generally, you can only deduct expenses in the year that you incur that expense, so if he purchased tools and equipment in years prior they are not deductible in a later year.
Good records are very important.
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