Tax Deduction for Business Start-up Expenses

When starting a new business, there are plenty of expenses.  You have to file a fictitious name with your state.  If the business is going to be a partnership, corporation, s corporation or LLC, you need to file with the state and pay for someone to create articles outlining how ownership is divided, what rights and responsibilities each person has, how you can make changes to the articles, and much more.  It takes money to do these things.

Section 195 of the Internal Revenue Code allows businesses to deduct these start-up expenses, up to $50,000, in the initial year of business.  However, if the start-up expenses exceed $50,000, the amount the business can deduct in the initial year of business is reduced.  The start-up expenses can still be deducted, but instead of deducting them all in the initial year of business they are deducted over a period of 180 months.