Set Up the Money
How to Track Startup Costs (and Deduct Them on Your First Return)
Short answer
You can deduct up to $5,000 of startup costs (research, marketing, legal, training) in your first year of operation, plus another $5,000 of organizational costs (LLC filing, attorney fees). Anything over $5,000 amortizes over 15 years. Track everything from the day you started planning the business — not just after you opened.
Most new owners miss thousands in legitimate first-year deductions because nobody told them startup costs were deductible. Don't make that mistake.
What counts as a startup cost
- Market research and competitive analysis
- Travel to scout locations or suppliers
- Pre-opening advertising and marketing
- Training, courses, certifications
- Consulting and professional fees
- Trial software subscriptions before launch
- Website domain, initial hosting, branding
How to document
- Save every receipt — digital photos count. Use a single 'Startup' folder in your phone or cloud storage.
- Track the date your business was 'placed in service' (first sale, first customer call, opening day).
- Costs before that date are 'startup costs'. Costs after are normal operating expenses.
- On your first Schedule C or 1120-S, elect to deduct $5,000 startup + $5,000 organizational up front (Section 195 election).
Frequently asked questions
What if I started planning two years ago?
All of it can still count, as long as you have records. The IRS doesn't cap how far back startup costs go — they only cap the deduction in year one.
Invoice from day one.
Glo Invoice is free for 14 days for new owners — your first invoice goes out in under 60 seconds.
Sources & further reading
Primary sources we consulted when writing and reviewing this guide.