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TAX BREAKS FOR START UPS
Starting a small business, use tax benefits available to start up companies including
Nail down current deduction. Normally, start up expenses must be amortized over 15 years, but you can take a current deduction for up to $5,000 of qualified expenses, subject to a phase out above a $50,000 threshold.
Under Section 179, a business can elect to currently deduct up to $500,000 of the cost of qualified property placed in service during the year. This will usually cover most, if not all of the heavy duty equipment costs that fall outside the current deduction for start up expenses. The annual deduction allowed under Section 179 can not exceed the total amount of income generated.
In addition to a Section 179 deduction, your business may also qualify for first year bonus depreciation for new qualified property. For property placed in service in 2016, the bonus depreciation equals 50% of the cost. Thus, you may be able to write off most of your main costs in the first year of operation.
Frequently, a small business will run at a loss for the first year of ownership and perhaps even longer. At least you can use that loss to offset other highly taxed income if the business is a sole proprietoship, or pass through entity.. Under the latest rules for net operating losses, you can carry back the loss for two years and then forward for up to 20 years. Thus, you might have to file an amended returns to get the full tax benefit.
If you are like many entrepreneurs, you might start you fledgling business out of your garage or basement. Even if the decor is decidedly low budget, you can claim a deduction for the portion of your home that is used regularly and exclusively for your principle place for business. To qualify, the home office must be your principle place of business or a place for meeting or dealing with customers, clients or patients. With this deduction, you can write off the appropriate percentage of household expenses plus a depreciaition allowance for the business part of the home
Daniel Cullinane CPA
25 Plaza 5 25th fl Jersey City NJ phone 732-516-1648 fax 732-516-9778
2500 Plaza 5 25th fl Jersey City NJ 07311 phone 732-516-1648 fax 732-516-9778