A taxpayer may elect to deduct for the taxable year in which the active trade or business begins up to $5,000 of start-up costs, reduced by the amount by which those costs exceed $50,000. The remainder is deductible ratably over the 180-month period beginning with the month in which the active trade or business begins. When does a business begin? A Tax Court case illustrates this issue. A taxpayer spent the year investigating targeted businesses to acquire but didn’t actually conduct any business. Thus, he wasn’t in an active business so his costs weren’t deductible that year.
Alert: Follow coronavirus-related federal tax changes for your business through the IRS.