I had business startup expenses in November of last year. The actual time my services began, was not until February of the following year. Can I deduct startup expenses in the previous tax year, or do I have to show income prior to deductions? Can they be carried over to the current tax year?

ANSWER

The BIDaWIZ Team's Answer:

We're assuming your business is organized as a sole proprietorship and files a Schedule C with your form 1040? Please let us know if otherwise. Up to $5,000 of start-up costs and $5,000 of organizational costs are deductible in the year they are incurred or 2013 in your case as long as the business has commenced. If the business has not commenced, then it would be capitalized and amortized starting in 2014. This is referenced in IRC Section 195 and IRS Publication 550.