Can you deduct your startup costs?
Yes. You can generally deduct up to $5,000 of startup costs in the year your business opens, and another $5,000 of organizational costs. The rest gets spread over 180 months. The $5,000 shrinks once costs pass $50,000. Equipment isn't a startup cost, so it follows the depreciation rules.
Updated November 2026 · By Pankil Kumar, Managing Partner
Quick facts
- First year. Up to $5,000 each for startup and organizational costs
- The rest. Amortized over 180 months
- When. Only once the business actually starts
What counts as a startup cost?
Startup costs are what you spend getting ready before you're open for business. They'd be deductible if you were already running.
- Market research and surveys
- Advertising before you open
- Pay for training staff before opening
- Travel to find suppliers or customers
- Consultant and professional fees for setup
Organizational costs are for forming the entity, such as state filing fees, legal fees for an operating agreement and the first organizational meetings. They're a separate $5,000 bucket.
What doesn't count?
| Spending | How it's treated |
|---|---|
| Laptop, equipment, furniture | Depreciation, or Section 179 |
| Inventory | Cost of goods when sold |
| Interest and taxes | Deducted under their own rules |
| Research and development | Its own rules |
How does the math work?
If you spent $14,000 on startup costs, you deduct $5,000 in the first year. The other $9,000 is spread over 180 months, or $50 a month, starting the month you open. If you opened in July, that's another $300 for the first year.
If startup costs are more than $50,000, the $5,000 shrinks dollar for dollar. At $55,000, it's gone, and everything is spread over 180 months.
When does the business actually start?
It's when you're open and ready to serve customers, even if no one's bought anything yet. Costs before that point get startup treatment. Costs after that are ordinary expenses you deduct right away. Keep receipts from the earliest days, including anything paid from your personal account.
What if the business never opens?
It depends on how far you got. General research on starting a business usually isn't deductible. Costs for a specific business you tried to buy or launch may be treated as a capital loss. If you've spent real money, keep the records and ask.
What should you do now?
Gather every receipt from before you opened, then record what you paid personally as an owner contribution. If you're just starting, our first-year checklist covers the rest.
Sources
General information, not tax advice for your situation.
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See our business tax returns serviceCan I deduct startup costs if I paid with my personal card?
Yes. Record them in your books as a contribution from you to the business, and keep the receipts.
Is my LLC filing fee deductible?
Yes. It's generally an organizational cost, with up to $5,000 deductible in the first year.
Can I deduct expenses before I made any money?
Yes, once you've opened for business. Having no sales doesn't change that, as long as you're ready to operate.
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