IRC §195 · 26 U.S.C. §195
IRC §195: Startup Expenditure Amortization
IRC §195 lets new businesses deduct $5,000 of startup costs immediately and amortize the rest over 180 months. The election that turns pre-opening spending into a tax asset.
What it governs
- $5,000 immediate deduction, reduced dollar-for-dollar above $50,000 of startup costs
- Remainder amortized ratably over 180 months from the month business begins
- Covers investigation, creation, and pre-opening costs — not equipment or inventory
- Deemed election: claim it on the return; no separate statement required
In the GuideFull treatment in Chapter 6 of the Guide — THE TAX CUTTERY® Guide to Federal Income Taxation, Professional Edition (564 pages, 24 chapters).
Related sectionsIRC §162 — the operating expenses that start when §195 ends · IRC §183 — startups need profit motive too
From the practiceStart the consultation — Paul on video, one question at a time →
Questions this section answers
- What counts as a startup cost?
- Investigating and creating the business — market studies, legal formation, pre-opening wages, training, advertising for the launch. Equipment, inventory, and real property follow their own recovery rules, not §195.
- What if the business never opens?
- Then §195 never triggers — unamortized startup costs of an abandoned project are generally lost (an individual’s investigation costs are nondeductible). Open the business or lose the deduction.
- Do I need to elect §195 treatment?
- It’s deemed: claim the deduction and amortization on a timely filed return and the election is made. To forgo it affirmatively (rare), attach a statement — otherwise the default helps you.
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The Guide treats 149 Code sections across 24 chapters — every claim verified against primary sources.
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