Steps to Write Off Business Start-up Costs

Written By Steps To Faculty Published September 30th, 2010

While some expenses that coincide with your business like meals and entertainment are partially deductible for an established business, there are many business start-up costs that can be written off if you know the six steps to write off business start-up costs effectively. Of course, some items may need to be depreciated if you owned them prior to starting up new business, but these amounts can still be valuable.

Step 1. Track business start-up costs from the very beginning.

Before you open your doors for business, you will undoubtedly already be racking up costs that can be written off. Start-up costs can be anything from funding an investigation of your prospective market and paying consultants to buying supplies and marketing your budding business. Keep track of these amounts carefully.

Step 2. Track organizational costs.

Charges associated with starting up new business can be written off, so document your spending carefully. These costs may include accounting fees, lawyer’s fees, and state incorporation fees.

Step 3. Take an upfront deduction.

If your business qualifies, now is the time you can write off the fees you have kept such careful track of. In the year that you are starting up new business, you can write off a maximum of $5,000 in business start-up costs as well as $5,000 in organizational costs. After the write offs are complete, you can receive tax benefits from the remaining expenses you have. However, you will not see all the advantages of a start-up business cost deduction until 15 years from now. Having said that, it is an improvement when compared to the old rules where you could deduct business start-up costs over five years, but could not fully write off anything.

Step 4. Depreciate existing furniture and equipment.

When you make purchases for your business like furniture and equipment that will become assets for the business, you can write these off, but you must first depreciate them. You cannot, after all, completely write off an expense that will become an asset for your business.

Step 5. Receive tax benefits from merchandise you purchased previously.

Anything you bought prior to starting up new business must be depreciated to its current value and written off when you begin to use them in your business. Office equipment and computers can be written off for five to seven years.

Put off as many purchases as you can until after your business opens. Things that you buy after opening may be fully written off within the opening year instead of depreciating over the next 15 years. Please visit for more great business advice.

Roger Due

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