Business Startup Expenses Deduction refers to the ability for a business owner to deduct certain costs incurred before the business begins operations on their tax return.
The IRS allows a deduction for startup expenses up to $5,000 for the first year of business, provided total startup costs do not exceed $50,000. If startup costs exceed this threshold, the deduction is reduced, and any excess must be amortized over 15 years.
Eligible expenses may include costs related to market research, advertising, employee training, and professional fees. For example, if an entrepreneur spends $6,000 on market research and $4,000 on legal fees before opening a bakery, they can deduct $5,000 in the first year and amortize the remaining $5,000 over 15 years.
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