Did you start a business this year or plan to start a business in 2017? Congratulations and welcome to the wonderful world of business ownership.
Starting a new business is exciting and can be new territory for many. There are often missed tax deductions that entrepreneurs should know about. New business owners are allowed a deduction of up to $5000 of actual business start up cost when the total start up cost are under $50,000. If you spend over $50,000 and not more than $55,000, the amount you can deduct is reduced.
You may be asking “What are Start-up cost?” They are expenses incurred before your business was technically opened.
The IRS defines “startup costs” as deductible capital expenses that are used to pay for:
1) The cost of “investigating the creation or acquisition of an active trade or business.”
*This includes costs incurred for surveying markets, product analysis, labor supply, visiting potential business locations and similar expenditures.
Example: You want to start a production company and target business in the Atlanta, GA area. This is surveying markets and business locations and the travel cost and expenses related to this research is Start Up Cost that may be deductible.
2) The cost of getting a business ready to operate (before you open your doors or start generating income). *These include employee training and wages, consultant fees, advertising, and travel costs associated with finding suppliers, distributors, and customers.
Example: You may for Public Relations, business cards, and marketing material before your business opens.
You are in the start up phase during the research, planning, and organization of your new business. Make sure you keep good records of all your expenses incurred while you are exploring business opportunities. When you business officially opens, you may be able to take advantage of this deduction.
The infographics on our Twitter Page show additional deductions and credits new businesses can take advantage of. Contact us for more details on how to utilize this deduction.
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