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QUESTION DETAIL
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I am thinking of starting a software business. I have contracted an acquaintance to do some preliminary programming to determine the feasibility of my idea. Are the wages I paid to him tax deductible? If so, how should they be documented?
ANSWER
The BIDaWIZ Team's Answer:
Generally speaking, you can deduct the costs associated with the creation of an active trade or business as per IRS publication 535. If the costs are $50,000 or less, you can deduct up to $5,000 on your 2012 tax return.
