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The expenses incurred to start a new business or to ready a property for rent are not deductible as ordinary trade or business expenses. However, an election can be made to amortize those costs as ?startup costs'.
Expenses incurred before the trade or business begins operations or before your property is available for rent are considered start up costs.
Following are the election rules in regard to these costs:
If the costs incurred are less than $50,000, then the first $5,000 can be expensed and the balance amortized on a straight line basis over 15 years.
If the costs are more than $50,000, then the entire amount must be amortized over 15 years.
Remember that without this election, those costs are simply not deductible. The costs that do qualify for the election are those ordinary and necessary expenses other than capitalizable expenses (purchase of assets).
Please call us if you have any questions about this election.