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Can you write off amortize startup costs?

TL;DR

Yes, you can amortize startup costs over a period of 15 years.

Detailed Answer

Startup costs are deductible if they are incurred to create an active trade or business or to investigate the creation or acquisition of an active trade or business. The IRS allows you to deduct up to $5,000 of startup costs in the first year, with the remainder amortized over 180 months (15 years). If your total startup costs exceed $50,000, the first-year deduction is reduced by the amount over $50,000. Examples of startup costs include market research, advertising, and employee training.

Where to Put It on the Tax Form

Report on Form 4562, Depreciation and Amortization, and carry to Schedule C or the appropriate business tax form.

Real World Example

A new coffee shop spends $10,000 on market research and employee training before opening. They can deduct $5,000 in the first year and amortize the remaining $5,000 over the next 15 years.

Calculation Required

A calculation is required for this deduction.

Calculate the amortization by dividing the remaining startup costs after the initial $5,000 deduction by 180 months. For example, if $5,000 is amortized, the monthly deduction would be $27.78.

Audit Risk & Documentation Tips

Maintain detailed records of all startup expenses, including receipts and invoices. Clearly document the business purpose of each expense to substantiate the deduction in case of an audit.

IRS Reference

IRS Publication 535, Business Expenses; Internal Revenue Code Section 195

Relevant Industries

Small BusinessEntrepreneursStartups

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Disclaimer: This is for informational purposes only and should not be construed as tax or legal advice. Always consult your tax advisor.

Page created on July 15, 2025

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