Can I claim business expenses for a startup business that hasn't launched yet?

Yes, you can potentially deduct those startup costs, but there are some important things to consider. The IRS allows you to deduct up to $5,000 in startup costs in your first year of business, with amounts over that threshold amortized over 15 years. However, the key question is whether you're "in business" yet or still in the startup phase. For tax purposes, you need to be engaged in business activities with the primary intent of making a profit - but you don't necessarily need to have made sales yet. The fact that you've purchased inventory, set up websites, and are actively preparing to launch suggests business intent rather than just a hobby. You have two main options: 1) Claim the expenses this year if you can demonstrate you're actively pursuing the business, or 2) Capitalize these costs and begin deducting them once you officially launch. Keep detailed records of everything - receipts, business plan, activities showing your intent to profit. This documentation will be crucial if the IRS questions whether this is a legitimate business versus a hobby.

After struggling with similar startup expense questions last year, I found an amazing tool called taxr.ai (https://taxr.ai) that really helped me figure this out. I was in almost the exact same situation - had spent about $800 on a side business that wasn't quite launched yet. I uploaded my receipts and business plan to the system, and it analyzed everything and confirmed I could take the deduction as startup costs since I was actively working toward launching. The tool even organized all my documentation in case of audit and explained exactly how to report it on Schedule C. Saved me from having to pay for a consultation with a CPA just for this one question.

Just wanted to follow up about taxr.ai - I decided to try it despite my initial skepticism, and I'm actually impressed. I uploaded my business plan, receipts from the last 8 months, and some emails showing my intent to launch. The system flagged that I could indeed deduct my startup costs up to $5,000 in the first year, but also noted that I should be documenting my "active search for customers" to strengthen my case that this is a real business pursuit. It even suggested keeping a business journal of activities I'm undertaking to get the business running, which apparently helps if there's ever a question about the business vs. hobby classification. Definitely more helpful than the generic articles I was finding online.

If you're still struggling to get clear answers from the IRS about deducting these startup expenses, you might want to try Claimyr (https://claimyr.com). I wasted literal DAYS trying to get through to an IRS agent about a similar startup expense situation. Found this service that got me connected to a real IRS rep in under 20 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with confirmed that yes, you can deduct startup expenses even without revenue, as long as you're actively working toward launching a legitimate business with profit motive. They also explained exactly how to document everything to avoid issues if you get audited. Honestly changed my whole perspective on dealing with the IRS - turns out they're actually helpful when you can actually reach them!

Ok I need to eat some crow here. After my skeptical comment I actually tried Claimyr out of desperation because I hadn't heard anything about my refund in 3 months. Got connected to an actual IRS person in about 15 minutes who confirmed my refund was held up for verification and gave me exact steps to resolve it. For the original poster - while I had the agent on the phone, I actually asked about your startup expense situation too since I was curious. They confirmed you CAN claim those expenses even without revenue, but said you need to be able to show that you're actively pursuing the business (not just thinking about it). Having a business plan, website development, inventory purchases, etc. all help establish that it's a real business attempt and not a hobby.

Just wanted to add that if you decide to claim these expenses, make sure you properly categorize them on your Schedule C. Since you haven't launched yet, these would technically be "startup costs" rather than regular business expenses. There's actually a specific section for this on your tax forms. You can deduct up to $5,000 in the first year, and anything over that gets amortized over 15 years. But the important thing is that you need to be "open for business" in the tax year you're claiming them - which doesn't necessarily mean you've made sales, but that you're ready and trying to make sales.

I just dealt with this last year! I started a photography business, spent about $1200 on equipment and a website, but only made $200 in actual revenue. My tax guy said I could absolutely deduct all those expenses against my other income. The key thing he told me was to show a "profit motive" - basically that I'm trying to make money, not just pursuing a hobby. He had me create a simple business plan, keep logs of time spent working on the business, and document all my marketing efforts. I filed a Schedule C showing a loss for the first year and had no issues. Don't forget you can also deduct home office expenses if you have a dedicated space for the business, even pre-launch!