How to Claim Start Up Business Costs on Your Taxes

You can deduct up to $5000 dollars per year of your start up business costs. According to the Internal Revenue Service (IRS) Publication 535, Chapter 7, the costs are considered capital expenditures. Costs that exceed $5,000 must be amortized, and the deduction amount is reduced for costs above $50,000. Here's how to claim deductions on your taxes:

Income Tax Returns

The year that you start your business is the tax year that you will be required to use your deductions. If you can't claim all of it in the first year, you can spread the deduction over seven and a half years. You claim the deductions on the income tax form that you use to file your business income, and no additional form is required for the deductions.

Taking Deductions after Submitting Tax Returns

The IRS allows you to deduct start up business costs within six months of the due date. Also, not all expenses will qualify as start up business costs for tax purposes. The costs must be directly related to creating or buying a business.


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