Business - start-up costs

Start up costs get accumulated and amortized AFTER the business starts actual operations. If you've had no income, are you really open for business yet?

Gene E. Utterback, EA, RFC, ABA

$5000 of startup costs and $5000 of organizational costs can be expensed by the business in the year that the business starts. (Note that this $5000 phases out when these types of costs start to exceed $50,000.) See Chapter 7 in IRS Pub 535 for more information.

When your business starts depends upon many factors one of which is the type of business you are starting. Generally, it starts when you are ready to accept a customer. You don't necessarily have to have revenue in the year you start. E.g., you may have accepted your first order order in Dec. of 2010 for shipment and payment in Feb. 2011. You are deemed to have started your business in 2010.

Say I start a farming operation in mid-summer w/ the cash crop of hard winter wheat. I'll have a whale of an expense in the acquisition of equipment, crop inputs (fuel, seed, fertilizer, other chemicals, etc. and perhaps hired labor and/or application costs) with no income to be generated if nature is kind until early/mid-summer of the following year.

I have no expenses and am not in business??? I don't _think_ so... :)

The Small Business Jobs Act of 2010 increased the startup cost deduction to $10K for tax year 2010 only, along with an increase in the phase-out range.

-Mark Bole

You need to read the definition of startup costs and organizational costs. We are not discussing your cost of goods sold and ordinary & necessary business expenses for a farm.