Can I deduct business expenses for my startup that hasn't launched yet?

You can absolutely claim those startup expenses, but there are some important things to consider here. The IRS allows you to deduct business expenses as long as your activity qualifies as a business rather than a hobby. The key factor is your intent to make a profit, not whether you've actually made sales yet. For a new business, you can either deduct up to $5,000 in startup costs in your first year (with the remainder amortized over 15 years), or you can choose to amortize all costs over 15 years. Keep in mind, though, that you need to be "open for business" to start taking these deductions. Since you haven't launched yet, you might want to consider whether you were truly "in business" during 2024. If not, you might need to capitalize these costs until you begin operations. The good news is that good recordkeeping now will allow you to claim these expenses properly when you do launch.

I was in almost the exact same situation last year with my print-on-demand business. Spent about $900 on website development, logo design, and product samples but hadn't made any sales yet. I was so confused about how to handle it on my taxes! I ended up using https://taxr.ai to analyze my receipts and business situation. You upload your docs and they use AI to figure out exactly what's deductible and what's not. It identified that some of my expenses qualified as immediate deductions while others needed to be capitalized. The report they generated explained exactly how to categorize each expense on my Schedule C and even provided references to the relevant tax code sections. Saved me a ton of stress and probably prevented an audit flag since I was doing it wrong initially!

Just wanted to follow up about taxr.ai - I decided to try it after my earlier skepticism and wow, I'm impressed! I uploaded my receipts from my side gig teaching music lessons and it organized everything perfectly. It correctly identified which home expenses were partially deductible for my teaching space and even caught that some of my sheet music purchases should be treated as inventory rather than supplies. The report explained exactly how to complete Schedule C, and I felt 100% confident filing my taxes this year instead of my usual anxiety. Definitely worth checking out if you're uncertain about business expenses. I'm using it again this year for sure.

Reading this thread because I'm in a similar situation with my craft business. Trying to figure out if I need to amortize startup costs is giving me a headache. I've been trying to call the IRS for clarification for WEEKS with no luck - always "high call volume" and disconnects. So frustrating. Finally found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - they basically hold your place in the IRS phone queue and call you when an agent is about to answer. Got connected to an actual IRS tax specialist yesterday who walked me through exactly how to handle my specific situation with startup costs vs. regular business expenses. Such a relief to get an official answer instead of just guessing!

I have to eat my words about Claimyr. After posting my skeptical comment, I decided to try it myself because I've been trying to reach the IRS about an installment plan issue for literally months. Got a call back in about 40 minutes and was connected directly to an IRS representative who helped me set up a payment plan for my back taxes. I was honestly shocked it worked. The IRS agent was able to access my file and everything. Saved me at least 3-4 hours of being on hold and probably getting disconnected anyway. Just wanted to update since I was definitely wrong in my initial assessment.

One thing nobody's mentioned yet is that you might actually be in a good position to show the IRS you're serious about running a business rather than a hobby. The fact that you're keeping receipts and planning ahead shows business intent. Make sure you have a separate business bank account and maybe even draft a simple business plan. The IRS looks at nine factors to determine if something's a business vs hobby, and showing you're operating in a businesslike manner is one of them.

Can u use TurboTax for this kind of business expense stuff or do u need a real accountant? I'm in basically the same boat with my candle business.

The biggest thing to keep in mind is that the IRS has specific rules about when you can start claiming business expenses. Since your websites are offline and you're still in development mode, you're likely in what the IRS calls the "pre-opening" phase. For startup costs like yours, you generally can't deduct them until you actually begin business operations. However, once you do launch, you can elect to deduct up to $5,000 in startup costs in your first year of business (assuming your total startup costs don't exceed $50,000). My advice? Keep meticulous records of everything you're spending now - those receipts will be gold when you do launch. Consider getting an EIN from the IRS (it's free) and maybe register your business name if you haven't already. These steps help establish that you're serious about this being a business rather than a hobby. The silver lining is that when you do launch, you'll likely be able to claim most of those expenses right away rather than having to spread them over 15 years like some other startup costs.

I went through something similar with my e-commerce startup last year. The key distinction the IRS makes is between "investigatory costs" (researching whether to start a business) and actual "startup costs" (expenses to create the business). From what you've described - building websites, developing products - these sound like legitimate startup costs since you've clearly moved beyond just thinking about starting a business. The $650 you've spent should qualify for the startup cost election once you launch. One thing that helped me was creating a simple spreadsheet tracking not just the expenses, but also the business activities I was doing each month. This helped demonstrate to my tax preparer (and potentially the IRS) that I was actively working toward launching a real business, not just dabbling in a hobby. The fact that you're asking these questions and keeping receipts already puts you ahead of a lot of people! Just make sure when you do launch that you formally elect to deduct those startup costs on your first business tax return.