Properly identify deductible start-up expenses ($5,000 up front and the
balance amortized) rather than letting them fall by the wayside (a
common oversight).

In its business expenses publication, the IRS says that start-up costs include those incurred in creating an active trade or business. Note the word “creating,” and keep that in mind while reading the next few paragraphs.

The tax code states that start-up expenses arise when you spend money to investigate the creation or acquisition of an active business, create an active business, or engage in a for-profit or production of income activity before the day on which the active business begins, in anticipation that such activity will become an active business.

These expenses can include:

-Travel expenses to gain knowledge from others already in the business

-Entertainment expenses to pick the brains of friends and business acquaintances

-A host of training costs

-Certain automobile expenses

-Long-distance, investigatory telephone calls

-Moneys paid for potential market, labor supply, transportation, or product surveys or analyses

-Advertising expenses incurred prior to opening

-Wages paid before opening to your new employees and their trainers

-Costs incurred to secure distributors, suppliers, and customers

-Fees paid to consultants and other professionals

To qualify as a start-up expense, the expense must be both a cost that you could deduct as a business expense if the business already existed, and
a cost incurred before your business begins.

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