Can I deduct research expenses relating to starting a new business?

Allan Madan, CA
 Apr 18, 2013


Where a taxpayer is carrying on a business and incurs expenditures on research to determine whether to expand his/her business,

  • to determine the desirability of developing a new product or line of products,
  • to develop a more efficient manufacturing process,
  • to improve administrative procedures

These expenses would be considered current operating expenditures and are deductible for tax purposes.

Where a taxpayer who is not presently carrying on any business incurs expenditures on research to determine whether a business should be started, such expenditures are not deductible.

Where a taxpayer who presently carries on business incurs expenditures on research to determine whether a new and separate business should be undertaken, these expenditures also are not deductible.

In either case, if the new business is in fact commenced, the expenditures will qualify as an eligible capital expenditure of that business.


The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.

Related Resources

Pin It on Pinterest

Share This