Start up & Organizational Costs

Taxpayers can elect to deduct up to $5,000 of start-up and $5,000 of organizational expenses in the first year of a business. Each of the $5,000 amounts is reduced by the amount by which the total start-up expense OR organizational expense exceeds $50,000.

All start-up and organizational expenditures that are incurred on or before the date of enactment (October 22, 2004) are to be considered in determining whether the cumulative cost of the start-up or organizational expenditures exceeds $50,000.

Expenses not deductible in the first year of the business are amortized over 15 years, consistent with the amortization period for §197 intangibles.

Effective for expenses incurred after October 22, 2004.

American Jobs Creation Act of 2004 H. Rept. No. 108-755

Quoted From – National Association of Enrolled Agents Newsletter October 29, 2004