Question

Jasmine started a new business in the current year. She incurred $10,000 of start-up costs. How much of the start-up costs can be immediately expensed (excluding amounts amortized over 180 months) for the year?

a. $0.
b. $10,000.
c. $5,000.
d. $2,500.
e. None of the choices are correct.

Answer 1

Jasmine can expense $5,000 of the start-up costs for her new business immediately because her total start-up costs do not exceed the $50,000 limit.

Step-by-step explanation:

Under current U.S. tax law, a new business can expense up to $5,000 of the start-up costs in the year the business begins. However, this amount is reduced by the amount that the total start-up cost exceeds $50,000. If Jasmine incurred $10,000 of start-up costs, she can expense the full $5,000 immediately because her start-up costs do not exceed $50,000.

The remainder of the start-up costs, in this case, $5,000, would then be amortized over 180 months. Jasmine can expense $5,000 of the start-up costs for her new business immediately because her total start-up costs do not exceed the $50,000 limit.