Internal Revenue Code · 26 U.S.C.

§ 195. Start-up expenditures

In force Text current through Public Law 119-121 (October 9, 2026) release point 119-121

Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).

Cite as 26 U.S.C. § 195

At a glance

Read from the text, the source credit and the official notes. Not part of the law.

Status: In force
Added: December 28, 1980 by Pub. L. 96–605
Last amended: July 4, 2025 by Pub. L. 119–21
Amendments: 4 dated changes in the source credit
Length: 4 subsections · 591 words · about 3 min to read
Defines: 2 terms
Cross-references: cites 2; cited by 2 Code sections and 5 other regulations
Regulations: 2 issued under this section

¶(a) Capitalization of expenditures

Except as otherwise provided in this section, no deduction shall be allowed for start-up expenditures.

¶(b) Election to deduct

¶(1) Allowance of deduction If a taxpayer elects the application of this subsection with respect to any start-up expenditures—

¶(A) the taxpayer shall be allowed a deduction for the taxable year in which the active trade or business begins in an amount equal to the lesser of—

¶(i) the amount of start-up expenditures with respect to the active trade or business, or

¶(ii) $5,000, reduced (but not below zero) by the amount by which such start-up expenditures exceed $50,000, and

¶(B) the remainder of such start-up expenditures shall be allowed as a deduction ratably over the 180-month period beginning with the month in which the active trade or business begins.

¶(2) Dispositions before close of amortization period

In any case in which a trade or business is completely disposed of by the taxpayer before the end of the period to which paragraph (1) applies, any deferred expenses attributable to such trade or business which were not allowed as a deduction by reason of this section may be deducted to the extent allowable under section 165.

¶(3) Special rule for taxable years beginning in 2010 In the case of a taxable year beginning in 2010, paragraph (1)(A)(ii) shall be applied—

¶(A) by substituting “$10,000” for “$5,000”, and

¶(B) by substituting “$60,000” for “$50,000”.

¶(c) Definitions For purposes of this section—

¶(1) Start-up expenditures The term “start-up expenditure” means any amount—

¶(A) paid or incurred in connection with—

¶(i) investigating the creation or acquisition of an active trade or business, or

¶(ii) creating an active trade or business, or

¶(iii) any activity engaged in for profit and for the production of income before the day on which the active trade or business begins, in anticipation of such activity becoming an active trade or business, and

¶(B) which, if paid or incurred in connection with the operation of an existing active trade or business (in the same field as the trade or business referred to in subparagraph (A)), would be allowable as a deduction for the taxable year in which paid or incurred.

The term “start-up expenditure” does not include any amount with respect to which a deduction is allowable under section 163(a), 164, 174, or 174A.

¶(2) Beginning of trade or business

¶(A) In general

Except as provided in subparagraph (B), the determination of when an active trade or business begins shall be made in accordance with such regulations as the Secretary may prescribe.

¶(B) Acquired trade or business

An acquired active trade or business shall be treated as beginning when the taxpayer acquires it.

¶(d) Election

¶(1) Time for making election

An election under subsection (b) shall be made not later than the time prescribed by law for filing the return for the taxable year in which the trade or business begins (including extensions thereof).

¶(2) Scope of election

The period selected under subsection (b) shall be adhered to in computing taxable income for the taxable year for which the election is made and all subsequent taxable years.

(Added Pub. L. 96–605, title I, § 102(a), Dec. 28, 1980, 94 Stat. 3522; amended Pub. L. 98–369, div. A, title I, § 94(a), July 18, 1984, 98 Stat. 614; Pub. L. 108–357, title VIII, § 902(a), Oct. 22, 2004, 118 Stat. 1651; Pub. L. 111–240, title II, § 2031(a), Sept. 27, 2010, 124 Stat. 2559; Pub. L. 119–21, title VII, § 70302(b)(6), July 4, 2025, 139 Stat. 192.)

Terms defined here

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start-up expenditure § 195(c)(1)
start-up expenditure § 195(c)(1)(B)

Regulations under this section

Treasury regulations (26 CFR) issued under § 195

Cross-references

Computed from the citations in the text of Title 26 and 26 CFR.

This section cites 2 other sections

Cited by 2 Code sections

Cited in 5 regulations not issued under it

Amendment history

From the source credit and the official notes, newest first.

July 4, 2025Amended by Pub. L. 119–21Parts changed in 2025: (c)(1)
September 27, 2010Amended by Pub. L. 111–240Parts changed in 2010: (b)(3)
October 22, 2004Amended by Pub. L. 108–357Parts changed in 2004: (b) (b)(1)
July 18, 1984Amended by Pub. L. 98–369Parts changed in 1984: (a) (b) (c) (d)
December 28, 1980Added by Pub. L. 96–605

Where it sits in the Code

Nearby sections

Official notes

Show the Law Revision Counsel's notes (amendments, effective dates)

Editorial Notes

Amendments

2025—Subsec. (c)(1). Pub. L. 119–21 substituted “174, or 174A” for “or 174” in concluding provisions.

2010—Subsec. (b)(3). Pub. L. 111–240 added par. (3).

2004—Subsec. (b). Pub. L. 108–357, § 902(a)(2), substituted “deduct” for “amortize” in heading.

Subsec. (b)(1). Pub. L. 108–357, § 902(a)(1), amended heading and text of par. (1) generally. Prior to amendment, text read as follows: “Start-up expenditures may, at the election of the taxpayer, be treated as deferred expenses. Such deferred expenses shall be allowed as a deduction prorated equally over such period of not less than 60 months as may be selected by the taxpayer (beginning with the month in which the active trade or business begins).”

1984—Subsec. (a). Pub. L. 98–369 amended subsec. (a) generally, substituting provisions dealing with capitalization of expenditures for provisions dealing with election to amortize.

Subsec. (b). Pub. L. 98–369 amended subsec. (b) generally, substituting provisions dealing with election to amortize for provisions dealing with start-up expenditures.

Subsec. (c). Pub. L. 98–369 amended subsec. (c) generally, substituting provisions setting forth definitions for provisions dealing with election.

Subsec. (d). Pub. L. 98–369 amended subsec. (d) generally, substituting provisions dealing with election for provisions dealing with business beginning.

Effective Date of 2025 Amendment

Amendment by Pub. L. 119–21 applicable to amounts paid or incurred in taxable years beginning after Dec. 31, 2024, subject to election for retroactive application by certain small businesses and election to deduct certain unamortized amounts paid or incurred in taxable years beginning before Jan. 1, 2025, see section 70302(e), (f) of Pub. L. 119–21, set out as an Effective Date note under section 174A of this title.

Effective Date of 2010 Amendment

Pub. L. 111–240, title II, § 2031(b), Sept. 27, 2010, 124 Stat. 2559, provided that: “The amendment made by this section [amending this section] shall apply to amounts paid or incurred in taxable years beginning after December 31, 2009.”

Effective Date of 2004 Amendment

Pub. L. 108–357, title VIII, § 902(d), Oct. 22, 2004, 118 Stat. 1652, provided that: “The amendments made by this section [amending this section and sections 248 and 709 of this title] shall apply to amounts paid or incurred after the date of the enactment of this Act [Oct. 22, 2004].”

Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title I, § 94(c), July 18, 1984, 98 Stat. 615, provided that: “The amendments made by this section [amending this section] shall apply to taxable years beginning after June 30, 1984.”

Effective Date

Pub. L. 96–605, title I, § 102(c), Dec. 28, 1980, 94 Stat. 3522, provided that: “The amendments made by this section [enacting this section] shall apply to amounts paid or incurred after July 29, 1980, in taxable years ending after such date.”