Expenses incurred before a business opens (market research, travel, training, professional fees) and the legal costs of forming the entity. Up to $5,000 of each can be deducted in the first year, with the rest amortized over 15 years.
Costs before the doors open are not ordinary expenses; they follow their own rules, and the $5,000 first-year amount phases out once total startup costs exceed $50,000. Missing the election means capitalizing everything.
When it begins the activity it was formed for, such as offering services to customers. Costs before that date are startup costs; costs after are ordinary expenses.
Source: IRC 195; IRC 248; IRC 709
Last reviewed September 17, 2026. Tax rules change; confirm current law before acting.
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