Dear reader, when did you start your business? Did you take advantage of the deductions of “startup costs”?

Whenever creating a Startup, you should treat all eligible expenses incurred before the operation of your business as Capital Expenditure. 

Generally, you can recover costs through depreciation deductions.

Not only for this-year startups!

These deductions not only apply to recently-founded startups.

Your business can deduct a limited part of the Startup costs and Organizational costs! You can recover the expenses you cannot deduct over a 180-moth period (15 years), starting with the month your business began its active operations.

Types of recoverable Startup costs

To know if a Startup-cost is recoverable, apply to it the following criteria:

• It’s a cost a business pays or incurs before they start their active trade or business.
• It’s a cost a business could deduct if they paid or incurred it to operate an existing active trade or business, in the same field as the one the business entered into.

They generally include amounts paid for:

• Surveys or analyses of the market, products, labor, transportation, or other business-related topics.
• Advertisement for the business opening.
• Salaries and wages for employees trained and their instructors.
• Travel expenses or necessary costs to prospect suppliers, distributors, or customers.
• Salaries and fees for consultants or similar professional services
• Research costs incurred while analyzing the purchase of an active business.

Non-qualifying costs

• Deductive interests
• Deductive taxes
• Research & experimentation costs
• The costs of purchasing a business itself (but, as mentioned above, the research costs do apply).

How to take advantage of the Startup deductions

In their first year, businesses can claim an immediate deduction for start-up expenses up to $5,000.  Any remaining expenses can be amortized in future years.

If your business had Startup expenses, saving money becomes a simple 3-step process!

1. Take a look at your expenses records during your Startup days. (Bonus: seeing how much you have achieved is a nice morale boost!)
2. Classify them as recoverable or non-qualifying.
3. Be ready to include them at your 2022 tax season Tax Form 4562

If you want to make this a 1-step process, IOOGO Tax Experts are ready to help you!

Schedule a Free Consultation with our experts to analyze your case & save BIG time this coming tax season!