At what point do the tax benefits start when you get into a new business (perhaps first business)?
Good question!
Answer: The breaks start when you think about starting the new business.
Tax law’s official name for these thinking-about-it expenses is “start-up.”
Avoid the Goof
Experience shows that you will do one of four things with your start-up expenses (three of which are bad):
1.
Take no deduction because you did not know that you could deduct the expenses of investigating and planning for a new business. (Most taxpayers do not know about the start-up rules and cheat themselves of the deductions.)
2.
Take the start-up deductions incorrectly as business deductions (cheating the government—until you’re caught).
3.
Capitalize the expenses, thereby cheating yourself of the deductions until you sell, close, or otherwise dispose of the business.
4.
Correctly claim business start-up expenses.
The biggest failure is lack of knowledge. Because you are now reading this article, you no longer suffer this disability.
Think about it. You could have $5,000, $10,000, $50,000, or more in deductible and amortizable start-up that could have fallen through the cracks without knowledge ... Log in to view full article.
