Cruel Timing

[GreenGA]

Those numbers seem a bit high for straight expense deductions.

The last time I filed corporate papers, 2005, the maximum expense deductions were just into the five figure range.  Everthing else had to be depreciated over the life of the purchase.  That does not mean a good accountant could not make it work to the taxpayer's advantage, but the IRS software is very, Very, VERY sophisticated now a-days and one of the most simple evaluations it makes is expenses vs. deductions vs. time in business.

IANAA,NAL

 

[Wonderwino]

You can lose money when starting a business by purchasing capital equipment (Festools).  The key tests are: that you have the intent to make a profit at the venture and that you do make a profit after the third year.  If you do not make a profit in the fourth year, expenses can only be deducted to the extent that they offset income for that venture.  If you have other income during the first three years, expenses can offset other income.  There is also a test for established businesses, which I think is that if three out of five years result in lossses, then it is considered a "hobby" business and deductions become limited until the company becomes profitable.  I'm not an accountant either, I just use Turbo Tax.