---
title: "Entrepreneurs: What can you deduct and when? - Brown Edwards"
description: Starting a new business is an exciting time. But before you even open the doors, you generally have to spend a lot of money. You may have to train workers and pay for rent, utilities, marketing and more. Entrepreneurs are […]
image: https://blog.becpas.com/hubfs/Imported_Blog_Media/03_07_16_511326754_SBT_560x292.jpg
---

[Twitter ** ](https://www.facebook.com/BrownEdwardsCPAs?utm_source=BE+Website&utm_medium=Website+Icon&utm_campaign=BE+Website+Social+Icon&utm_content=Facebook) [Facebook-f ** ](https://www.linkedin.com/company/brown-edwards/?utm_source=BE+Website&utm_medium=Website+Icon&utm_campaign=BE+Website+Social+Icon&utm_content=LinkedIn) [Linkedin ** ](https://www.youtube.com/channel/UC3ReCSn6AFfdQiCUsH4oopA?utm_source=BE+Website&utm_medium=Website+Icon&utm_campaign=BE+Website+Social+Icon&utm_content=YouTube) [Youtube ** ](https://www.youtube.com/channel/UC3ReCSn6AFfdQiCUsH4oopA?utm_source=BE+Website&utm_medium=Website+Icon&utm_campaign=BE+Website+Social+Icon&utm_content=YouTube)

[ Client Portal ](https://becpas.sharefile.com/Authentication/Login)

[ Make A Payment ](https://becpas.com/payments/)

[ Request Proposal ](https://becpas.com/request-for-proposal/)

![](https://blog.becpas.com/hubfs/Imported_Blog_Media/03_07_16_511326754_SBT_560x292.jpg)

# Entrepreneurs: What can you deduct and when?

 Published by [ Laura Sprouse ](https://blog.becpas.com/author/laura-sprouse) on  Mar 29, 2016 3:35:21 PM

Starting a new business is an exciting time. But before you even open the doors, you generally have to spend a lot of money. You may have to train workers and pay for rent, utilities, marketing and more.

Entrepreneurs are often unaware that many expenses incurred by start-ups can’t be deducted right away.

**How expenses are handled on your tax return**

When planning a new enterprise, remember these key points:

- Start-up costs include those incurred or paid while creating an active trade or business — or investigating the creation or acquisition of one. Organizational costs include the costs of creating a corporation or partnership.
- Under the federal tax code, taxpayers can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs. The $5,000 deduction is reduced dollar-for-dollar by the amount by which your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized over 180 months on a straight-line basis.
- No deductions or amortization write-offs are allowed until the year when “active conduct” of your new business commences. That usually means the year when the enterprise has all the pieces in place to begin earning revenue. To determine if a taxpayer meets this test, the IRS and courts will generally ask: Did the taxpayer undertake the activity intending to earn a profit? Was the taxpayer regularly and actively involved? Has the activity actually begun?

**An important decision**

Time may be of the essence if you have start-up expenses that you’d like to deduct this year. You need to decide whether to take the elections described above. Recordkeeping is important. Contact us about your business start-up plans. We can help with the tax and other aspects of your new venture.

[Back to Blog](https://blog.becpas.com)

## Related Articles

<https://blog.becpas.com/as-governors-lift-covid-19-restrictions-what-happens-to-the-cares-act-employee-retention-credit>

## [As Governors Lift COVID-19 Restrictions, What Happens To The CARES Act Employee Retention Credit?](https://blog.becpas.com/as-governors-lift-covid-19-restrictions-what-happens-to-the-cares-act-employee-retention-credit)

 MAY 7, 2020

[Read More ](https://blog.becpas.com/as-governors-lift-covid-19-restrictions-what-happens-to-the-cares-act-employee-retention-credit)

<https://blog.becpas.com/can-take-american-opportunity-credit>

## [Who Can — And Who Should — Take The American Opportunity Credit?](https://blog.becpas.com/can-take-american-opportunity-credit)

 If you have a child in college, you may be eligible to claim the American Opportunity credit on...

[Read More ](https://blog.becpas.com/can-take-american-opportunity-credit)

<https://blog.becpas.com/havent-filed-your-2017-income-tax-return-yet-beware-of-these-pitfalls>

## [Haven’t Filed Your 2017 Income Tax Return Yet? Beware Of These Pitfalls](https://blog.becpas.com/havent-filed-your-2017-income-tax-return-yet-beware-of-these-pitfalls)

 The federal income tax filing deadline is slightly later than usual this year — April 17 — but it’s...

[Read More ](https://blog.becpas.com/havent-filed-your-2017-income-tax-return-yet-beware-of-these-pitfalls)

```json
{
  "@context" : "https://schema.org",
  "@type" : "BlogPosting",
  "author" : {
    "@type" : "Person",
    "name" : "Laura Sprouse",
    "url" : "https://blog.becpas.com/author/laura-sprouse"
  },
  "dateModified" : "2021-06-01T21:23:03.719Z",
  "datePublished" : "2016-03-29T19:35:21.000Z",
  "headline" : "Entrepreneurs: What can you deduct and when? - Brown Edwards",
  "image" : [ "https://blog.becpas.com/hubfs/Imported_Blog_Media/03_07_16_511326754_SBT_560x292.jpg" ],
  "mainEntityOfPage" : {
    "@id" : "https://blog.becpas.com/entrepreneurs-what-can-you-deduct-and-when",
    "@type" : "WebPage"
  },
  "publisher" : {
    "@type" : "Organization",
    "logo" : {
      "@type" : "ImageObject",
      "url" : "https://blog.becpas.com/hubfs/2021%20BE-Logo-4color-oldgold-3.png"
    },
    "name" : "Brown Edwards & Company, LLP"
  }
}
```