Starting Your Business/Keeping Tax Records
What are Business Expenses
Start-up Costs
Start-up costs are costs for setting up an active trade or business
or investigating the possibility of creating or acquiring an active trade or business.
Start-up costs include any amounts paid or incurred in connection with an activity engaged
in for profit and the production of income in anticipation of the activity becoming an
active trade or business.
To be amortizable, your start-up cost must meet the following tests.
- It must be a cost you could deduct if you paid or incurred it to
operate an existing trade or business.
- You must pay or incur the cost before you begin your business
operations.
Start-up costs include what you pay for investigating a
prospective business and getting the business started. They may include costs for the
following items:
- A survey of potential markets,
- An analysis of available facilities, labor, supplies, 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, and
- Salaries and fees for executives and consultants, or for other
professional services.
Start-up costs do not include deductible interest, taxes,
and research
and experimental costs. See Research and Experimental
Costs.
How
to Amortize
Important References:
Publication
535
Business Expenses
Form
4562
Depreciation and Amortization
Instruction
for 4562
