What Are Specific Examples of Start-Up Expenses Below $5,000?

You can deduct up to $5,000 of your start-up expenses the first year you are in business.

Tellus TIP:

Take note that, once you are in business, that is, after you have placed an advertisement or otherwise started offering the property for rent, all your expenses are considered to be operating expenses.

Examples of possible start-up expenses include:

• Costs of rental market research

• Educational information, including how-to books, classes, or seminars

• Attorney and accounting fees (except legal and other fees paid to complete the purchase of the rental property)

• Licenses

• Insurance premiums

• Meals, food, and lodging if you have to travel overnight to get the property ready to rent

• Repairs

• Office supplies, such as telephone, paper, and notebooks (not applicable to equipment and other long-term assets)

• Printing bank checks

• Advertising your property, such as ads and signs

• Any other operating expenses that you paid before offering the property for rent, such as landscaping and gardening costs, property maintenance, and utilities (excluding utility connection fees)

• Big-ticket items, excluding the cost of the property itself: all equipment, furniture, and appliances that are expected to last more than one year

Tellus TIP:

The items which are considered long-term assets are deductible only in limited amounts per year, via depreciation. Also absent from the list are any expenses directly related to the purchase of the property, such as closing costs, escrow fees, attorney’s fees, travel expenses related to the purchase, title insurance, and transfer taxes. These costs are added to the property’s tax basis and depreciated over time.