Do I qualify to file Schedule C this year?

I just graduated from Massage School and have spent nearly $1500 in supplies and equipment (start up costs) in 2006. I passed my national exam the 6th of January and am still waiting for my actual license. My question is - can I file schedule C in 2006 or do I lose all of the start up expenses that I have already spent?

Do I qualify to file Schedule C this year?
You will not LOSE your expenses but must wait to use them AFTER you start your business. The equipment you purchase can be depreciated BEGINNING in the year you place it in service.





In other words, if you start your business February 15, 2007, (remember the date you start the business - you will need it later for many reasons) then the date you place the equipment that you have already purchased in service will be the day inwhich depreciation begins.








FOR NEW EQUIPMENT AFTER BUSINESS BEGINS:





Ex: You purchase a massage table March 3, 2007 for 2000.00.





When you file your 2007 taxes, you will "depreciate" the massage table using 03/03/2007 as date placed in service until the end of the year or you may "write off" the entire $2000.00 for tax year 2007 through Section 179 depreciation.





Make sure you keep receipts for all purchases in case you are audited.
Reply:To add on to what Wayne Z said, when you do start your business (2007), you do not deduct all of your start up expenses in one year. Start up expenses are capitalized and amortized evenly over a period that you can choose, but it cannot be less than 60 months. Your equipment have to be capitalized anyways and depreciated over it's useful life (equipment is generally 5 years, although office equipment such as desks, filing cabinets, etc. are depreciated over 7 years). Depreciation starts when the equipment is placed in service (begins to be used), not when it is purchased. You do have the option to elect Section 179 on the capital assets and fully depreciate it in one year, provided that you have the income to deduct it against. Therefore only the supplies that you purchased should be capitalized as start up expenses. However, since supplies are consumables that you would typically use up and have to replenish before the tax year is up anyways, you would have a good argument that the supplies should not be capitalized as start up expenses and amortized over 5 years. So, in your case, I would just report the $1,500 (split it out between your supplies and your equipment) on your 2007 tax return as deductions against your massage income.
Reply:Start Up expenses are deductable after you start your business.





You don't lose them, but you can only tax them after you officially open for business.
Reply:Did you operate your business in 2006? If not, don't worry about a Sched C until tax time in 2008. You won't lose your start up expenses. Keep any receipts and documentation of purchases because you'll need all of that for your tax pro. Don't rush it with the Sched C because you don't want to end up owing Uncle Sam unnecessarily.