Question

Taxes

Forum|Forum|2 years ago
March 3, 2024
1 reply
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Hello, I am sorry if this is obvious but this is all new to me I didn’t make any money last year and I only formed my LLC this year. Do I still claim the business expenses for taxes last year or do I wait until I file taxes for next year since my LLC or any of my small business didn’t start until after December 31.

Not A Product Question

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MinhT1

If you only start your LLC and start incurring the expenses in 2024, you report these expenses on the 2024 tax return (next year).

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M

melody32Author

Thank you. Can I file to account for business expenses that I spent before this time or is it best to just wait for next years taxes?

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MinhT1

It depends.

If the expenses you incurred in 2023 are startup costs then you will deduct them only in 2024 when you start actively trading.

Startup costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business.

You can elect to deduct up to $5,000 of start-up costs in the year in which the active trade or business begins. Any remaining costs must be amortized.

If you started your business in 2023 but it begins to become active only in 2024, you can deduct up to $5,000 of start-up costs in 2024.

You can also elect not to deduct those start-costs and amortize them. Start-up costs are amortized over a period of 180 months (15 years).

Please read this IRS document for more information, under the heading Business Startup Costs.

On the other hand, if you are already active in 2023 and incurred ordinary expenses, you can deduct these expenses in 2023 even if you do not yet have income in 2023. But as your LLC is not yet create, you will have to report these expenses on Schedule C of your personal return

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