Duvall & Associates, Inc.
BUSINESS ADVISOR NEWSLETTER
 

 Deducting costs of pursuing new job, new company

- by Alan Duvall 

Published in Dayton Daily News  April 1, 2007 

“Ten years living in a paper bag... Chasing dragons with plastic swords... A change would do you good.”  -Sheryl Crow 

America was built brick-by-brick by people chasing dreams.  Indeed, the free-flow of our country’s resources provides the major foundation for the nation’s continuing progress.  To enhance incentives for economic movement, Congress has provided a tax package of deductible business transition costs.  

Certain un-reimbursed job hunting expenses are (itemize) deductible, even if the search is unsuccessful, provided the individual is seeking employment within the person’s existing trade or business.  Thus, an engineer may deduct job hunt expenses to locate another engineering job, but no deductions accrue upon a search for golf pro opportunities.  Transportation, housing, resume costs and employment fees are examples of deductible expenses.   

Moving your family and household over 50 miles due to new employment may also generate tax benefits.  Deductible are un-reimbursed travel and lodging (not meals) costs as well as vehicle mileage at 18 cents per mile. 

Aspiring entrepreneurs have been bestowed new tax breaks for expenses incurred to begin a new company.  In years past, arguments existed pre-opening expenditures may not be deductible since the taxpayer was not officially “in business” at time of payment.  

Tax law has generally provided for first year expensing of furniture and equipment purchased and used in a new enterprise, subject to limits now residing at $108,000 per year. 

Recent law changes allow an immediate deduction of a maximum $5,000 start-up, investigatory and pre-opening expenses incurred to successfully form a new enterprise.  Additional start-up costs may be written off ratably over 15 years.  

A supplemental $5,000 deduction is provided for organization costs (such as legal and accounting fees) to form a new corporation or partnership.  Again, additional organization costs may be expensed over a 15-year period. 

Both first-year ($5,000) start-up and organizational write-offs are diminished if each set of expenses exceed $50,000 in total.  Imaginative planning could forestall the timing of expenses until after business start-up thus avoiding limits.  

“You know a man of my ability should be smokin’ on a big cigar... Instead I’m stuck here workin’ at the car wash blues.”  -Jim Croce

Alan Duvall is a certified public accountant in Dayton.  Contact him at Alan@Duvallcpa.com.