Starting a new business will be very exciting but full of dangers like potential tax pitfalls.
In this article, we explain the rules for starting a new business so you can understand them and earn all the tax
benefits the tax code offers.
The IRS says that start up costs include those in creating an active trade or business. Note the word “creating.”
Expenses can include
- Travel expenses-to perhaps gain knowledge from others already in the business.
- Entertainment expenses-to pick their brains.
- Training costs
- Certain car expenses
- Long-distance, investigatory telephone calls
- And many more
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 to qualify as a start up expense.
Deductible interest taxes and research and development costs don’t qualify as start up.
You begin to accrue tax benefits the moment you start thinking about your own business. Make sure you document those start up expenses.