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June 1, 2019
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Can i deduct business expenses if i have no income from the business

  • June 1, 2019
  • 1 reply
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I have just started a business back in November of 2016 and I had $823.42 in startup costs and business expenses in November and December before I had made any profit. I wanted to know if I can write those expenses off for my 2016 taxes.
    Best answer by MichaelDC

    Yes. They can. In fact, that's almost the definition of startup costs.

    Startup costs come from investigating the creation or acquisition of an active trade or business. They are paid or incurred before the business opens its door.

    Examples include:

     - Market research

     - Travel costs

     - Salaries

     - Consulting fees

     - Accounting and legal fees

     - Pre-opening advertising expenses, and

     - Overhead 

    How these expenses are handled:

    Up to $5,000 of startup costs paid or incurred can be deducted if the total startup costs incurred don't exceed $50,000. An election can be made to amortize costs in excess of $5,000 over a period of 15 years.

    If total startup costs exceed $50,000, the excess over $50,000 reduces the amount you may deduct. For example: If you incur $52,000 worth of startup costs, you can deduct $3,000 ($5,000 - ($52,000 - $50,000 = $2,000)) and amortize the remaining $49,000 over at least 15 years.


     

    Note: Cash basis businesses may not begin amortizing these costs until the costs are actually paid.


    1 reply

    MichaelDCAnswer
    Employee
    June 1, 2019

    Yes. They can. In fact, that's almost the definition of startup costs.

    Startup costs come from investigating the creation or acquisition of an active trade or business. They are paid or incurred before the business opens its door.

    Examples include:

     - Market research

     - Travel costs

     - Salaries

     - Consulting fees

     - Accounting and legal fees

     - Pre-opening advertising expenses, and

     - Overhead 

    How these expenses are handled:

    Up to $5,000 of startup costs paid or incurred can be deducted if the total startup costs incurred don't exceed $50,000. An election can be made to amortize costs in excess of $5,000 over a period of 15 years.

    If total startup costs exceed $50,000, the excess over $50,000 reduces the amount you may deduct. For example: If you incur $52,000 worth of startup costs, you can deduct $3,000 ($5,000 - ($52,000 - $50,000 = $2,000)) and amortize the remaining $49,000 over at least 15 years.


     

    Note: Cash basis businesses may not begin amortizing these costs until the costs are actually paid.