Which Expenses Are Considered Start-Up Costs in a Business?

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If you've got a great idea for a product or service, you may be thinking about starting your own business. You probably know that there are a number of tax deductions available for business owners. Deductions for start-up costs, in particular, can help offset some of the costs associated with getting your business off the ground. Keep all records of products or services that you purchase for your business.

Start-Up Costs

  • Start-up costs include advertising fees, rent paid prior to opening your business, costs associated with analyzing the market (including travel costs), and costs to build a website for your business.

Organizational Costs

  • The costs involved in organizing your business qualify as start-up costs. These include the costs involved in forming your corporation or limited liability company (LLC) and any legal fees related to setting up your business.

Up-Front Deduction

  • For 2009, you can write off up to $5,000 for both start-up costs and organizational costs. If your expenses exceed $50,000, you may not be eligible for the full deduction. Start-up costs that exceed $5,000 must be amortized over 15 years.

Depreciation

  • Typically, costs incurred at the start of your business for property or equipment that will last the duration of your business must be depreciated. These include office furniture, equipment and buildings. However, you may be eligible to take a Section 179 deduction for certain types of property put into service in 2008.

Section 179 Deduction

  • The Section 179 deduction allows you to deduct the full costs of tangible property such as machinery, equipment or livestock, up to $250,000. However, you are ineligible if the total cost of your property exceeds $1,050,000.

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