When you launch a new business or purchase an existing one, you’ll typically incur expenses before the business is up and running.

The IRS classifies these as capital expenses, which generally aren’t deductible right away. Instead, they’re added to your cost basis in the business—meaning they sit on the books without providing any tax benefit until you sell or otherwise dispose of the business and they offset your taxable gain.

Fortunately, a special provision in the tax code offers more immediate relief. You can deduct up to $5,000 of start-up costs in your first year of business, then spread (amortize) any remaining amount over the next 180 months—15 years—of operation.1

The catch: to qualify as a start-up expense, a cost must be one that would be an ordinary deductible business expense if you incurred it after your business opened—even though, by definition, you’re incurring it before that point.2 These costs generally fall into two categories:

Investigatory expenses

Pre-opening expenses

Investigatory Expenses: When You’re Thinking About Starting a Business

Costs you incur to decide whether to enter a new business and which new business to enter are deductible start-up expenses.3

Examples of such investigatory start-up expenses include

expenses to analyze or survey potential markets, products, labor supply, and transportation facilities;

travel expenses to find a location, suppliers, distributors, or customers; ... Log in to view full article.