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posted May 31, 2019 6:16:34 PM

Do startup costs include initial purchasing of items like computers/software/cameras?

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1 Best answer
Level 13
May 31, 2019 6:16:36 PM

No.  Those items you mention would be separately capitalized and/or expensed.

"Start-up" costs pertain to the creation and organization of the business entity itself, e.g., fees and other costs related to establishing an LLC in a state, or the creation of an S or C corporation, and research costs, etc. in determining if the business activity itself is viable or makes sense.  Here's the IRS's take on what comprises start-up costs:

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Business Start-Up Costs

Start-up costs are amounts paid or incurred for: (a) creating an active trade or business; or (b) investigating the creation or acquisition of an active trade or business. Start-up costs include amounts paid or incurred in connection with an existing activity engaged in for profit; and for the production of income in anticipation of the activity becoming an active trade or business.

Qualifying costs.   A start-up cost is amortizable if it meets both of the following tests.
  • It is a cost you could deduct if you paid or incurred it to operate an existing active trade or business (in the same field as the one you entered into).

  • It is a cost you pay or incur before the day your active trade or business begins.

  Start-up costs include amounts paid for the following:
  • An analysis or survey of potential markets, products, labor supply, transportation facilities, etc.

  • Advertisements for the opening of the business.

  • Salaries and wages for employees who are being trained and their instructors.

  • Travel and other necessary costs for securing prospective distributors, suppliers, or customers.

  • Salaries and fees for executives and consultants, or for similar professional services.

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Tom Young

2 Replies
Level 13
May 31, 2019 6:16:36 PM

No.  Those items you mention would be separately capitalized and/or expensed.

"Start-up" costs pertain to the creation and organization of the business entity itself, e.g., fees and other costs related to establishing an LLC in a state, or the creation of an S or C corporation, and research costs, etc. in determining if the business activity itself is viable or makes sense.  Here's the IRS's take on what comprises start-up costs:

-------------------------------------------------------------------------------------------------------------------------

Business Start-Up Costs

Start-up costs are amounts paid or incurred for: (a) creating an active trade or business; or (b) investigating the creation or acquisition of an active trade or business. Start-up costs include amounts paid or incurred in connection with an existing activity engaged in for profit; and for the production of income in anticipation of the activity becoming an active trade or business.

Qualifying costs.   A start-up cost is amortizable if it meets both of the following tests.
  • It is a cost you could deduct if you paid or incurred it to operate an existing active trade or business (in the same field as the one you entered into).

  • It is a cost you pay or incur before the day your active trade or business begins.

  Start-up costs include amounts paid for the following:
  • An analysis or survey of potential markets, products, labor supply, transportation facilities, etc.

  • Advertisements for the opening of the business.

  • Salaries and wages for employees who are being trained and their instructors.

  • Travel and other necessary costs for securing prospective distributors, suppliers, or customers.

  • Salaries and fees for executives and consultants, or for similar professional services.

-------------------------------------------------------------------------------------------------------------------------

Tom Young

Level 9
May 31, 2019 6:16:37 PM

If those items are $200 or less per item, then you can add them to Startup Expenses.  For any items over $200 per item, they are added as separate "assets" into TurboTax.