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Pike & Lustig, LLP. We see solutions where others see problems.

Tax Laws Can Help You Start That Business


Let’s say that you are starting a new business, and you have all the standard expenses that come with starting a new business. This is a huge expense—but you are comforted at least by the fact that those expenses are business expenses, or even losses, and thus, can be deducted from or written off from your taxes.

But you then have another problem: if your business is like most businesses, you may not make much of a profit your very first year anyway. So, the fantastic tax write-offs that you would have from all the expenses in starting up the business, aren’t even needed, because your business isn’t paying many taxes in the first place, because it isn’t making much of anything in the first year.

Wouldn’t it be nice if you could take those tax write-offs from that first year, and use them later, when the business is making more money, and those write-offs or deductions can be put to better use?

Deferring Tax Write Offs and Deductions

As a new business, you have two tax choices.

On one hand, you can take up to a $5,000 deduction, and then whatever other deductions you have, can be spread out over the next few years. But you can also take absolutely no first year deductions, and spread your deductions out, over the next 15 years—when, hopefully long before that time, your business will be making some money and can use the write-offs.

But it gets better for new businesses: not only do you get to take $5,000 in deductions from that first year, but on top of that you get an additional $5,000 in write-offs for hard costs associated with starting your business, such as professional fees, licensing fees, or money to the state for corporate formation or paperwork.

Not Just for Startup

The costs that you get to setoff from, or deduct from your business, aren’t only related to startup costs. They can even be applied to costs associated with whether you should even start the business.

So, for example, if you spent $2,000 scouting out the perfect location for your business, or you spent $1,000 for a study of demographics in a given area to see if it’s the right place to start your business, you can set these costs off as well.

There’s one catch to this rule: You can’t have more than $50,000 total in startup costs. That means that if you have a lot of costs involved in starting up your business, you may prefer to wait and spread those costs out over a few years, so as not to go over that cap.

Any equipment you purchase will not be included in startup costs, for the purpose of calculating deductions, or the $50,000 cap. However, you still get other tax benefits, because most equipment will depreciate in value, giving you other tax advantages.

Let us help you start that new business, the right way. Call the West Palm Beach business litigation lawyers at Pike & Lustig today.


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