Writing Off Your Business Start-Up Costs

The business start-up costs for a small business can be very expensive because most small business owners must finance the start-up costs themselves. Therefore, it is important to learn what business start-up costs a business can write off. A business start-up cost is money used to start a new business before you open for business. Most expenses that are ordinary, necessary and reasonable and that a business uses to earn income can be written off. However, the expense or property must be similar to property other businesses in your field use and must advance the goal of generating revenue for the new business.

Maximum Amount You Can Write Off
The first year that you start your business, you can write off a maximum of $5,000 in business start-up costs and up to $5,000 in organizational costs. For example, you can write off expenses related to researching, hiring a business consultant, and any initial supplies that you need to start the business. In addition, licensing fees and legal fees can also be written off as part of your organizational costs. Also, any start-up expenses that you cannot write off because they exceed the $5,000 maximum amount can be amortized over 180 months. It may take you longer to see these deductions, but they are still available as long as they relate to your business start-up costs.  

Writing Off An Asset  
You may also be able to write off equipment that you need to start your business. You can take a write off for all equipment that you purchase and use for your first year. The amount you can write off changes yearly, so check with your accountant to determine the exact amount of asset purchases you can write off as part of your business start-up costs. 

If you need to purchase a vehicle for your business, you may be able to write off part of the expense. However, the car must be reasonable and necessary for your business. For example, if you are starting a plumbing business, you will most likely need a truck or van to drive when you are out visiting clients' homes.The maximum amount that you can write off in a year is a little more than $3,000. In addition, you might consider deducting mileage instead of writing off the purchase of the vehicle.

Getting Help
If you have any questions about what start-up costs you can write off, contact an accountant or tax professional to determine whether your expenses qualify for a tax write off.