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Know More About Startup Costs and Tax Deductions

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Startup costs may be eligible for tax deductions. However, large purchases are not deducted all at once on returns. Many expenses are amortized – meaning the deduction is situs judi online spread out over time, usually around 15 years. You must depreciate the cost during this period. As an example, if you buy new office equipment, you can list pieces as a tax deduction but must claim depreciated cost. The reason you can’t take the tax deduction all at once is that the IRS categorizes startup costs as capital expenditures. This category is for purchases, such as equipment and vehicles, that the business uses over the course of several years, not in one tax year.

According to Intuit, the IRS allows you to deduct $5,000 for startup costs and $5,000 in organizational costs in your first year of operation. However, startup costs cannot exceed $50,000, or else you can’t put the deduction on your tax return. You must file in the same year that you opened, or submit an amended tax return to reflect the deduction. Amortization is beneficial because you can make the deduction over a 15-year period. For instance, if your startup costs come to $30,000, you can deduct $2,000 annually from the tax return.

To learn what other tax deductions your business might be eligible for, review IRS Publication 535. Keep in mind that business deduction rules change year to year. Startup costs that can be deducted during the current tax year might not apply to the next year.