To date, there has been no standard method or tool to analyze the installed and operational costs for distributed wind turbine systems. This report describes the development of a classification system, or taxonomy, for distributed wind turbine project costs. The taxonomy establishes a framework to help collect, sort, and compare distributed wind cost data that mirrors how the industry categorizes information. The taxonomy organizes costs so they can be aggregated from installers, developers, vendors, and other sources without losing cost details. Developing a peer-reviewed taxonomy is valuable to industry stakeholders because a common understanding the details of distributed wind turbine costs and balance of station costs is a first step to identifying potential high-value cost reduction opportunities. Addressing cost reduction potential can help increase distributed wind's competitiveness and propel the U.S. distributed wind industry forward. The taxonomy can also be used to perform cost comparisons between technologies and track trends for distributed wind industry costs in the future. As an initial application and piloting of the taxonomy, preliminary cost data were collected for projects of different sizes and from different regions across the contiguous United States. Following the methods described in this report, these data are placed into the established cost categories.