You can start deducting business expenses as soon as your business is operational and actively engaged in income-generating activities. The IRS allows businesses to deduct ordinary and necessary expenses incurred in the course of conducting business to generate income or profit.

Here are some key points to consider regarding the timing of deducting business expenses…

1. Business Operation Start Date – Business expenses incurred after your business begins operations are generally deductible. This includes expenses related to setting up your business, such as obtaining licenses and permits, leasing office space, purchasing equipment, and hiring employees.
2. Income-Producing Activities – Business expenses must be incurred in connection with income-producing activities to be deductible. This means that expenses related to activities undertaken to earn income or profit for your business are generally deductible. For example, expenses related to product development, marketing, sales, and customer service may be deductible.
3. Ordinary and Necessary Expenses – To be deductible, business expenses must be both ordinary and necessary. Ordinary expenses are common and accepted in your industry or trade, while necessary expenses are helpful and appropriate for your business. Examples of deductible business expenses include rent, utilities, office supplies, advertising, insurance premiums, professional fees, and travel expenses.
4. Recordkeeping Requirements – It’s essential to maintain accurate records and documentation of your business expenses to support your deductions in case of an IRS audit. Keep receipts, invoices, bank statements, and other relevant documents to substantiate your expenses and ensure compliance with tax laws and regulations.
5. Business Entity Type – The timing of deducting business expenses may vary depending on your business entity type. For example:
   • Sole Proprietorships and Single-Member LLCs: Business expenses are typically reported on Schedule C (Profit or Loss from Business) of the owner’s personal tax return (Form 1040). Expenses incurred during the tax year can generally be deducted against business income to calculate net profit or loss.
   • Partnerships and Multi-Member LLCs: Business expenses are reported on Form 1065 (U.S. Return of Partnership Income) for partnerships and on the members’ personal tax returns for LLCs. Similar to sole proprietorships, expenses incurred during the tax year can generally be deducted against business income.
   • Corporations: Business expenses are reported on the corporation’s tax return (e.g., Form 1120 for C corporations or Form 1120S for S corporations). Expenses are deducted in the tax year in which they are paid or incurred, following the accrual method or cash method of accounting.

You can start deducting business expenses once your business is operational and engaged in income-producing activities. Ensure that your expenses meet the criteria of being ordinary and necessary for your business and maintain proper records to support your deductions. If you have questions about deducting specific business expenses or tax implications, consider consulting with a tax professional or accountant familiar with small business taxation.