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Date confusion for start up costs for new business

Hi! I started advertising and working on my business back in 2014, but it was essentially a hobby until March of 2016 when I was separated from my job and decided to focus on it full time. I registered it as an LLC in April, which I would think should count as a start-up cost, but apparently the start-up costs have to be PRIOR to the business starting. What about all of the items purchased in addition to licenses etc. in order to START the business?
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Accepted Solutions
HelenaC
New Member

Date confusion for start up costs for new business

Yes, you may be able to deduct them. Items purchased for your business, before you opened your doors for "business" are start up expenses. 

Start-Up Expenses are reported in aggregate - one amount equal to the total of all expenses incurred. For active business activities, these costs are entered either under Assets/Depreciation or under Business Expenses depending...

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."

  • As long as your start-up expenses are less than $5000, you can add them as Business Expenses. Continue past the expense categories (or choose Other Miscellaneous Expenses) to the page titled "Enter Business Expenses Not Yet Reported" and enter the description & amount.
  • If you have more than $5000 in start-up costs, the remainder is entered under Assets/Depreciation as a capital asset for amortization (TurboTax provides this category for you).


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1 Reply
HelenaC
New Member

Date confusion for start up costs for new business

Yes, you may be able to deduct them. Items purchased for your business, before you opened your doors for "business" are start up expenses. 

Start-Up Expenses are reported in aggregate - one amount equal to the total of all expenses incurred. For active business activities, these costs are entered either under Assets/Depreciation or under Business Expenses depending...

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."

  • As long as your start-up expenses are less than $5000, you can add them as Business Expenses. Continue past the expense categories (or choose Other Miscellaneous Expenses) to the page titled "Enter Business Expenses Not Yet Reported" and enter the description & amount.
  • If you have more than $5000 in start-up costs, the remainder is entered under Assets/Depreciation as a capital asset for amortization (TurboTax provides this category for you).


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