Where do I report my business start-up costs?

If you started a new business, you may be able to deduct some of your business start-up costs on your tax return.

Generally, the IRS allows eligible businesses to deduct up to $5,000 of start-up costs in the first year your business becomes active. Any remaining eligible start-up costs may need to be amortized (deducted gradually) over time. According to the IRS, start-up costs include amounts paid or incurred to create or investigate the creation or acquisition of an active trade or business. 

To enter your deductible start-up costs in the program

1. Go to Federal.
2. Select Income (Select My Forms).
3. Open Profit or Loss from Business.
4. Select Other Expenses.
5. Enter your eligible start-up costs.

Important

The $5,000 first-year deduction may be reduced if your total start-up costs exceed certain IRS thresholds. Any eligible costs that can't be deducted immediately must generally be amortized over a 15-year period. 

How Do I Enter Amortized Start-Up Costs?

If part of your start-up expenses must be amortized, enter those costs in the depreciation section of your Schedule C.

Follow these steps:

1. Go to Federal.
2. Select Income (Select My Forms).
3. Open Profit or Loss from Business.
4. Select Schedule C (Edit).
5. Choose Depreciation.
6. Select Assets.
7. Enter your start-up cost information.

When entering the asset:

• Set the Depreciation Method to Amortization.
• Enter a Useful Life of 15 years.
• Under Select Code Section Used, choose SEC 195 - Business Start-up Costs.

The program will calculate the annual amortization deduction and carry the appropriate amount to your return each year.

What Counts as a Start-Up Cost?

Examples of common start-up costs may include:

• Market research
• Advertising before opening
• Consultant and professional fees
• Training costs for employees
• Franchise start-up fees
• Costs related to investigating or creating a new business

Additional Info

Keep records of all expenses and supporting documentation in case the IRS requests additional information.