As we all know, it’s that dreaded time of the year-Tax time! In honor of tax season, I have a new series called “Ask An Accoutant”. Send in your tax questions and each week to firstname.lastname@example.org and I will post the question and give an answer from an experienced accountant.
Question of the week:
I own a small home based business. Can I deduct my computer cost?
Computers used for business purposes should be listed as an asset and depreciated over 5 years based on its percentage of business use. In other words, if your business use of the computer is 75% of the time, then you can deduct 75% of the computer’s annual depreciation. (Depreciation is the means of recovering the cost of a business asset over a predetermined life based on IRS guidelines. Computers are considered to have a 5 year life) However, a special provision in the tax code allows accelerated depreciation of property used more than 50% for business. Meaning, you can deduct the full cost of the computer based on the business percentage in the year the computer is put in service. For example, if the computer originally costs you $500 and you use it 75% of the time for business, you can deduct 75% of $500 (or $375 in the current year). Once the full cost of the asset is recovered, it is no longer eligible for the depreciation deduction. Which means you can’t deduct it anymore from your taxes.
Some other items that fall into this same situation are computer monitors, printers, hard drives, scanners, cellphones and cameras.
*Please keep in mind this post is for informational purposes only and answers given are very general. Many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.