The IRS has issued final regulation on the election to deduct startup expenses. These rules apply to individuals, corporations and partnerships. These entities can deduct (in the tax year an active trade or business begins) up to $5,000 of startup expenses. If the startup expenses exceed $5,000, the excess expense can be amortized over the 180 month period beginning with the month the active trade or business begins.
There are limitations. If the startup expenses exceed $50,000, the immediate $5,000 deduction is reduced on a dollar for dollar basis. When the expenses exceed $55,000 the only deduction is the amortization.
How do you make the election? The election is automatic. You have deemed to make the election by deducting the $5,000 in the year the business starts. You can, if you want, make an affirming election on the return.
This is a great tax benefit for a new company that has a lot of growing pain issues in the beginning. Give your ShindelRock [1] tax professional a call to assist you in maximizing this expense.