If expense incur now and my business won’t start until next year, are the expense deductible for 2010?

November 16, 2009 by admin · 4 Comments
Filed under: United States 
business
DwithQuestions asked:

I’m starting up a small home based business. I’m planning to buy office equipment and some inventory now, but the business won’t be up and running until January 2010. I want to claim the business expenses incurred this year as deductions for 2010? Is it possible and how? Should I choose the accrual based accounting method? Also should I open a business account now or it’s ok to pay the expenses with my personal credit card? thank you for your answers!

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4 Responses to “If expense incur now and my business won’t start until next year, are the expense deductible for 2010?”
  1. the tax lady says:
    November 17, 2009 at 8:20 pm

    No, it’s called a startup expense and must be deferred until the business opens. It does not matter if you are cash based or accrual. the tax lady

  2. zeuz says:
    November 18, 2009 at 4:00 am

    It’s better to pay the expenses with a business account. However, if you use a personal account today, then in 2010, have the business “reimburse” you for the business expenses on the business account.

    (It’s just a little cleaner for bookkeeping purposes.) zeuz

  3. hrblockerrolquinn says:
    November 19, 2009 at 5:58 pm

    Dear D: These start-up costs will be deducted or capitalized in ‘10. That is they will be listed in 2011 when you do your 2010 taxes.

    Look at IRS Pub 535. These costs are deducted in the year your business starts. You have the choice of deducting up to $5000 with limitations or capitalizing them over a 60-180 month period. Depending on your income level it will be a decision on your part to maximize the effect on your taxes. Run the numbers both ways and do some homework in the Pub 535.

    If you could crank it up this year, all of this could be used in the current year.

    This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more. Errol Quinn Enrolled Agent hrblockerrolquinn

  4. tro says:
    November 22, 2009 at 7:02 am

    your purchases etc now are considered preopening expenses and when you actually get the business open, those can be amortized over a 5 yr period, except that if the provision stays, you can take the first $5000 as a one time deduction, next year(2010)
    inventory is not preopening expenses
    if you plan to do your own bookkeeping, keep it simple, and do not use accrual accounting
    using a credit card for your business expenses is probably a good way to keep all in one place, but you need to keep your receipts anyway
    go to and request publication 34 to help you tro

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