26 U.S.C. § 195 — Start-up expenditures

(a) Capitalization of expenditures. Normally, no deduction is allowed for start-up expenditures — they must be capitalized instead — unless this section says otherwise. (b) Election to deduct. (1) Allowance of deduction. If a taxpayer elects to use this subsection for start-up expenditures: (A) in the year the active trade or business begins, the taxpayer can deduct the smaller of (i) the actual start-up expenses, or (ii) $5,000 — reduced (but never below zero) by however much the start-up expenses go over $50,000; and (B) whatever is left gets deducted evenly over the 180 months (15 years) starting with the month the business begins. (2) Dispositions before the amortization period ends. If the taxpayer completely gets rid of the business before that period ends, any deferred expenses not yet deducted because of this section can be deducted under section 165's rules instead. (3) Special rule for 2010. For a tax year starting in 2010, the numbers in (1)(A)(ii) change: $10,000 instead of $5,000, and $60,000 instead of $50,000. (c) Definitions. (1) "Start-up expenditure" means an amount paid or incurred either (A) to investigate creating or buying an active trade or business, to actually create one, or for a for-profit, income-producing activity done in anticipation of it becoming an active trade or business — and (B) that would have been deductible if it had instead been paid for running an existing business in the same field. It doesn't include amounts already deductible under sections 163(a), 164, 174, or 174A. (2) "Beginning of trade or business." Generally, Secretary regulations decide when a business begins. But a business the taxpayer buys (rather than starts) is treated as beginning when the taxpayer acquires it. (d) Election. (1) Time for making election. The election under subsection (b) must be made by the deadline (including extensions) for filing the tax return for the year the business begins. (2) Scope of election. Once made, the chosen 180-month period must be used for that tax year and all following years.