Launch a Business and Save Thousands with Startup Tax Deductions

January 6, 2014 | By More

Tax CalculationThe average cost of starting a small business from scratch is just less than $30,000, according to the U.S. Small Business Administration. Whether you need that much startup capital or just a few thousand for a small venture, there are ways to cut costs and minimize expenses with tax write-offs.

Don't let tensions and uncertainty over taxes keep you from saving thousands. The IRS allows deductible startup costs across a variety of everyday expenses. Here are a few:

Creation or acquisition of a business

You might be missing out on deductions if you're not keeping track of what you have spent to set up your business. The IRS allows deductions for market research, real estate research, labor supply and product analysis.

Keep careful records on exactly what you're doing during the startup phase. If you visit a business location, make a free spreadsheet using Google Docs to document the time, place and duration you traveled. Also remember to track all expenses that may fall outside of the startup phase that are also deductible. This might include food, entertainment or equipment, such as a laptop.

Getting ready to open for business

Don't rely on your own memory to figure out what steps you took and what you spent to open your doors. Scan receipts and documents into your computer, and back them up on a secured site such as cloud storage service Dropbox. Keep tabs on everything you spent on advertising and travel costs as you search plan appropriate inventory suppliers, employee training, and other related logistics.

Organization costs

Business owners usually incorporate themselves or set up some type of legal proprietorship when starting a business. The IRS will accept write-offs for state incorporation fees and related legal expenses, salaries for temporary directors, and accounting and filing fees.

Many small business owners incorporate themselves and pay for relevant fees online. Create an Organization Cost folder in your email to store related receipts and information in one place.

Ongoing expenses

Not everything can be written off during the startup phase, even if it's a relevant business expense. While the IRS won't allow you to write off office equipment and invoicing software like Intuit during the startup phase, it will allow you to write it off as a depreciating expense. You can also write off your home office, office supplies and mileage, among other expenses.

Keep an accessible paper trail

Business owners could save in the neighborhood of $5,000 from startup-related write-offs, Fox Business reports. But it doesn't matter how lucrative a write-off you create if you don't have the receipts and paper trail to back it up. Start by applying for dedicated business credit cards solely for business expenditures to have aneasy and accessible paper trail to all of your expenses. You can also access your credit card account online and sort expenses by retailer and category to hunt down a needed expense. As an added bonus, many cards include rewards such as airline miles and cash-back options.

Category: Finance related, Starting and building a business

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