Can you write off business expenses before making income?

Yes—sometimes. In the U.S., you generally can’t deduct ordinary operating business expenses as regular business expenses before your business is actually active, but you may be able to deduct or amortize startup costs and organizational costs once the business is ready to begin operations.

General rule:

• Before the business is active, most pre-launch costs are treated as startup costs, not regular business expenses.
• Once the business begins active operations, you may be able to take the startup-cost deduction and amortize the rest.

Common IRS treatment:

• You can generally deduct up to $5,000 of eligible startup costs in the first year your business begins active operations.
• That immediate deduction is reduced if total startup costs are over $50,000.
• Any remaining eligible startup costs are generally amortized over 15 years (180 months).
• Organizational costs for forming a corporation or LLC can have a similar tax treatment, but they are handled under separate rules.

Important caveats:

• The expenses have to be ordinary, necessary, and tied to a real business activity.
• If the business never launches, the tax treatment can differ, and some costs may not be deductible as business startup costs.
• Rules can vary by state, entity type, and facts, so it’s worth checking with a CPA or tax preparer before filing.