How Do You Deduct Start-Up Expenses Over $5,000?
What if your start-up expenses add up to more than $5,000? During the first 15 years of your business, you can deduct more than $5,000 in start-up expenses.
However, this is a long time to wait in order to get the full deduction value of your expenses. A useful strategy is to put the property on the rental market as soon as possible so that you never go over the $5,000. This automatically activates the change to the operating expenses area (where there are no restrictions).
Another problem with spending more than $5,000 during your start-up period is that, if your expenditures end up exceeding $50,000, you will not get to use the full $5,000 start-up deduction. Your allowable deduction is reduced by any amount you spend over $50,000 on start-up expenses. For example, if you spend $54,000 in startup expenses, you will lose $4,000 of your first-year deduction. That means you will get a $1,000 first-year deduction and you will have to spread out (amortize) the remaining $53,000 worth of deductions over the next 15 years.
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