What is the process to writeoff startup costs?
From what I understand, I can write off up to $5000 of startup costs from the taxes I pay on my personal income... http://www.morebusiness.com/write-off-startup-costs Let's say I start a website and pay someone $5000 to design it. Can I write that off, and if so, do I have to register the business and make the purchase in the business's name? ex. LLC taxed at sole propietor
Also, can this be done every year with a new business?
3 Answers
There are so many ways to think about tax laws, tax rules, and tax strategies - I strongly suggest you find a good tax adviser who will take the time to really understand your situation. In the long run a good tax guy is worth his/her weight in gold.
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Yes this is the plan but I am looking for some early preparation /learning. – Sk24iam 14 years ago
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As a sole proprietor, your best bet will probably be to file a Schedule C. This doesn't require previous 'registration' or fees. Your business starts when you say it starts. An accountant will probably tell you that you could take the $5000 one time for each business you start. But they better each be 'legitimate' businesses. Too many businesses could trigger an audit. If so, you will need to convince the IRS that you are really trying to make money with each one. Remember, the $5k limit is only there for STARTUP costs. All ongoing expenses can be deducted from revenue. Good luck. – Dave Feyereisen 14 years ago
As a sole proprietor, you deduct that money spent from your personal taxes, and then invoice the client (the LLC) later.
do I have to register the business and make the purchase in the business's name?YES. You cannot claim a business deduction on your tax form if no business exists.
Also, can this be done every year with a new business?Startup costs are the costs associated with starting your business (for example incorporation fees). Since you only start your business once, you can only deduct these costs once in the life of the business. If you happen to start a new company the following year, you can deduct the startup costs associated with that new company.
