You can write-off certain expenses as long as the business opens. Allowable expenses include those related to Investigation (such as travelling to potential business locations) and Preparation (for example, employee training). There is a separate category related to Organizational costs (fees associated with establishing the business, like legal services). For both Investigation/Preparation and Organizational expenses, there is a maximum deduction of $5,000 each.
Startup expenses cannot be applied after the date the business opens. Expenses incurred after that time become regular business deductions, if applicable.
What Are Startup Costs?
Startup costs are defined as one-time expenditures strictly linked to the opening of a new business. Often these costs are tax deductible, so they should be tracked in a businesses’ accounting processes.
Business owners can only expense the claims once and not again later as regular business expenses.
What Startup Expenses Can I Deduct?
Investigation/Preparation expenses for a business can include the following:
- Advertising, including agency fees
- Startup financing (investments and loans)
- Office Rent & security deposit
- Construction (improvements to make a place workable)
- Web hosting service
- Office utilities (such as phone systems, wi-fi)
- Office supplies
- Employee training
- Travel costs
- Supplies for manufacturing activities
- Shipping supplies
- Business cards
Although some of these costs seem like regular day to day expenses for a business, they can be considered startup costs if they are purchased before the business opens.