Hi, Mark Kohler here with another tax and legal tip let's talk about startup costs now
This is an important expense for all business owners because at one point or another your business was in
Start-up mode if we want to make sure we maximize those write-offs and track them properly all right. Let's hit the basics first
Tracking I
Need you to write down everything related to the startup of your business from the day you think of starting your business?
[I] don't care if you use quickbooks or an excel spreadsheet or a pad of paper or Rock and chisel write it down
Because your accountant at the end of the year is going to need them so track them somewhere
and then when your accountant says oh
You started a small business you can throw out all those [start-up] costs next
Timing now a startup cost according to the irs has to directly relate to the startup your business now
There's no timing rule per se as long as you can [show] those costs directly related to the startup now
I [think] it's going to be hard to write off your cell phone [2] years ago when you thought of starting a business
But if you've been in research and development and building prototypes in your garage for two years and you can show [that] prototype
Evolving to what you're selling today that can very well be [a] start-up cost that you've captured along the way for the last two years
But typically for all of us startup costs are going to go back
Maybe six months to a year at most and you're going to take all those costs related to
developing your business idea legal marketing
Business development and products or services and testing them and printing costs
and I don't know anything related which could even be that cell phone at A
Reasonable time period from the beginning of your business third, how much of these are actually deductible according to the iRs right now?
You can write off the first five thousand and then the rest have to be amateur eyes dover time
so for example if you incur twelve thousand [dollars] of expenses getting your business off [the] ground this year and then you
Start business which will come to it
And you're ready to write these off your accountant can write off the first five grand in one fail swoop and then take the other
Seven Grand and put them into a bucket and start to write them off over time
The amortization period Is [fifteen] years and you may think that's a long time
But if you ever close down to business they rush forward and you get to [write] them off the day
You close your business until then you have to write them off over time fourth and final point
When are you in business when does that start up mode end and your business start well?
It's when you make a sale
So let me use an example any of you that have listened to me before know I love a lemonade stand
Hashtag support a lemonade stand
Now if you go out and start your lemonade stand tomorrow
And you're buying sugar and ice and building the sign and table and you're out there. Are you in business yet?
no, not until you sell your first cup of lemonade now you may have spent 500 bucks [giving] the lemonade stand ready and sold your
First cup of lemonade for [a] dollar now you can write off that [500] dollars. You've got one dollar of revenue
500 of start up you've got [a] four hundred ninety nine dollar loss on your tax return this year that's how startup costs work you
Could use that loss against other income as you meet with your accountant to figure out the best place to put it
But that is when your startup of your business ends is when you make the first sale
So an important tax tip here is go out and make some money
[I] can't write off [your] startup cost until you have a sale of a service or product
That's one of the best year-end tax tips is getting out making some money so we [can] capture your startup cost this year
So but forfeit before December 31st make some money. Thanks for watching it if you love that video
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