piety@hplabs.UUCP (Bob Piety) (08/22/83)
How does one go about deducting personal computing equipment?
Since it invariably costs more than $1000 should the expense be capitalized?
If so, should it then be depreciated annually?
Or, should one simply claim a HUGE "miscellaneous" deduction related to one's
profession or for the purpose of managing investments, etc?
Please post any replies as I'm sure the answers pertain to many.
Thanks,
Bobjohnson@hplabs.UUCP (Mark Scott Johnson) (08/22/83)
To the best of my knowledge, the issue of whether or not a computer professional can write-off a personal computer is murky. If it's used in a consulting business, clearly it can be written off on Schedule C (business income and expenses). If it's used exclusively for managing investments, it's a miscellaneous Schedule A deduction (altho if the amount claimed is greater than the income derived, the IRS might well contest the deduction as "unreasonable"). The big unknown is whether you can write-off a personal computer merely as a professional expense (miscellaneous Schedule A deduction) when you are an employee. I'm sure the IRS will take a dim view of this. (Can anyone cite cases?) If you're in this third class, I recommend getting your employer to write a letter verifying that the computer is "necessary and reasonable" for your job, but not provided by the employer. If all events, if your computer is used for personal stuff more than a small amount (say, 5-10%), I'm sure the IRS expects you to prorate based on your use. In general, a computer must be capitalized since it has a lifetime exceeding one year. If you're a business, you can now expense up to $5000 of stuff that would normally be depreciated. The advantage is greater immediate reduction in taxes; the disadvantage is loss of an investment tax credit. I don't believe this $5000 expense rule applies to any use other than as a Schedule C business. (Does anyone know for sure?) -- Mark Scott Johnson
johnson@hplabs.UUCP (Mark Scott Johnson) (08/22/83)
Taking a HUGE miscellaneous itemized deduction for a personal computer is inviting an audit! -- Mark Scott Johnson
andrew@tekecs.UUCP (Andrew Klossner) (08/24/83)
For tax year 1983 you can expense up to $10,000 (that's ten thousand bucks for those of you with broken net news) of capital equipment when you're filing a schedule C, under ACRS. (A net correspondent reported the amount to be $5,000 (five thousand), which was true for previous tax years.) This doesn't seem to apply to anything other than business-acquired capital, i.e., I don't believe that it will work as a miscellaneous employee expense. Anyone who's serious about writing off the cost of computer equipment should probably set up a business anyway, so as to avoid the murk of schedule A. You need to be in a profit-making endeavor and you must show a profit for two out of five years of business. Getting a DBA card from the state and opening a business checking account are good ideas. -=- Andrew Klossner (decvax!tektronix!tekecs!andrew)
jrf@hp-pcd.UUCP (James Fontenot) (08/24/83)
#R:hplabs:-175600:hp-pcd:14900003:000:188 hp-pcd!jrf Aug 23 10:32:00 1983 Generally, you can deduct an expense when it generates income. The manner of deduction is determined by your particular tax situation now, and what you expect it to be in the future.