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Small Business Deductions: Startup Costs

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How to Claim Start-up Costs and Organizational Costs

To claim organizational costs do the following:

  1. Form 4562: If you are amortizing any start-up or organizational costs, you must compete Part VI of Form 4562 (the amortization section).
    • Column (d) asks for the Code section; enter 195.
      • This is the Internal Revenue Code Section for start-up Expenditures.
    • Carry the amortization amount to Schedule C, Part V (Other expenses).
      • This is the section of Schedule C where you enter expense items not included in Schedule C, Part II.
  2. Schedule C:
    • In Part V (Other expenses):
      • Enter a description and amount for your allowable first year deduction for start-up and organizational costs (up to $5,000 each) plus any amortization you entered on Form 4562, Part VI. If you have all three items, enter each on its own line.
      • Enter the description and amount of each expense.
    • Line 27:
      • Carry the total amount of all items listed in from Part V of Schedule C, to line 27 (Other expenses).
  3. Statement: Prepare a statement which includes:
    • A description of each expense
    • The amount of each expense
    • When they were incurred
    • The date the business began operations
    • The number of months in the amortization period.
  4. Attach your statement and Form 4562 to Form 1040.