Can you deduct what you spent before you launched?

Yes, partly. Up to $5,000 of startup costs in year one, with the rest spread out over 15 years.

Most founders spend real money before the business officially exists: market research, a logo, legal fees, travel to meet early customers. The good news is that a lot of it is deductible. The catch is how and when.

Two buckets

Startup costs are what you spend investigating and getting ready to open a business before it starts operating. Think market research, advertising before launch, training, and travel to line up suppliers or customers.

Organizational costs are what it costs to create the entity itself, like legal fees to form the LLC or corporation and state filing fees.

How the deduction works

For each bucket, you can deduct up to $5,000 in your first year of business. Whatever’s left gets amortized over 180 months (15 years), starting the month the business begins.

There’s a limit: if your startup costs top $50,000, the $5,000 first-year deduction shrinks dollar for dollar. At $55,000 or more, it’s gone and everything gets spread over 15 years. The same rule applies separately to organizational costs.

What doesn’t count

Equipment and other assets you buy before launch. Those get depreciated once the business starts, often much faster than 15 years.
Costs to buy an existing business follow different rules.
Personal expenses. Your gym membership is still your gym membership.

Why records matter

The deduction only works if you can show what you spent and when. Keep receipts and note what each pre-launch expense was for. A business bank account or card from day one makes this a lot easier.

The short version

Pre-launch spending isn’t wasted for tax purposes. Up to $5,000 in each bucket comes off in year one, and the rest gets spread out. Track it from the beginning, and we’ll sort it into the right buckets at tax time.