dgary@ecsvax.UUCP (D Gary Grady) (02/01/85)
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I have been looking into the tax question of late, and I thought what I
have learned might be of interest to the net. I caution you in advance
that I am NOT a tax lawyer or an accountant!
The deductibility of a microcomputer used at home depends on when it was
put into service, for what purpose it is used, and whether it is used in
a "home office."
A computer used in a place of business (including a home office - but
bear in mind that getting a home office deduction is, well you remember
the cartoon in which Daffy Duck had to lay a golden egg?...) is generally
fully deductable as a business expense on schedule C (for a sole
proprietorship) or the corresponding forms for corporate and partnership
returns. Most businesses should have a CPA handling that so I'll say
no more on that.
For a computer owned by an individual and used at home, the rules depend
on whether the machine was actually "placed in service" prior to June 18,
1984. A home machine placed in service prior to that date is deductable
to the extent that it is used for business purposes (e.g., if it is used
25% for business, it is 25% deductible). An employee can claim this
deduction (more correctly, an adjustment to income) by filing form 2106
(I think the number is - it's the form for employee business expenses)
along with the usual 1040. I believe you MUST file 1040 (not 1040A or
EZ), but you do NOT have to itemize personal deductions. Be prepared to
substantiate the percentages.
The full cost of the computer can be deducted in one year (up to a
maximum of around $7500 - see Lasser or any other tax guide for the
exact figure). Alternatively, you can spread the deduction over five
years and take an additional "bonus" investment tax credit in the first.
That gets complicated and again suggests the use of an accountant or a
careful reading of tax guides.
If the computer was placed in service on or after June 18 and you want
to write off the computer as an employee business expense, you've got
problems. First, IRS will insist you prove not only that you use the
machine for business, but that your employer absolutely requires you to
own one in order to keep your job(!). Then, you must show that it is
used at least 50% for business. How? IRS says by keeping a
"contemporaneous log" - that is, every time you use the computer you
write down how long you used it, and for what. Going back at the end of
the year and backfitting a log won't do. (Word is that this requirement
MAY be relaxed, but don't depend on it.) If you depreciate over several
years you have to meet these requirements over the whole period, and if
necessary file amended returns if the situation changes. Sound awful,
doesn't it?
I hope that's of some use. I say again that I am only reporting what I
have read in the media and in tax guides; I am NOT an accountant or a
tax attorney, and you'd do well to contact one of them if you have a
question. If you discover any of the above is in error, PLEASE correct
it. Good luck. Happy April 15!
--
D Gary Grady
Duke U Comp Center, Durham, NC 27706
(919) 684-3695
USENET: {seismo,decvax,ihnp4,akgua,etc.}!mcnc!ecsvax!dgarydgary@ecsvax.UUCP (D Gary Grady) (02/05/85)
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A few corrections and additions to my recent posting on deducting
micros:
First, I am now given to understand that the maximum amound deductable
in one year on a micro system purchased prior to June 18 is $5000, not
$7500 as I wrote.
Second, I may have been wrong when I said that you must be able to
substantiate that your micro is used at least 50% for business (on
machines placed in service on or after June 18, 1984) in order to deduct
it. I have seen one source that claims that with less than 50% use you
can still deduct it, but you must depreciate it (instead of deducting
the whole cost in one year) and you cannot get the investment tax
credit.
My feeling (and remember I'm not an accountant!!) is that if you bought
the machine before June 18 and you can substantiate business use of x%,
you're probably safe taking x% as an employee business expense in one
year. If you plan to depreciate (for example, if you anticipate higher
income in the future) or you bought it after June 18, most of us should
have an accountant handle it. I mean, reading hex dumps is trivial
compared to reading tax law...
--
D Gary Grady
Duke U Comp Center, Durham, NC 27706
(919) 684-3695
USENET: {seismo,decvax,ihnp4,akgua,etc.}!mcnc!ecsvax!dgarydgary@ecsvax.UUCP (D Gary Grady) (02/07/85)
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Drat, drat, drat. Another error in what I said before:
It is NOT possible to deduct a computer used for business purposes
on form 2106 (as I suggested). 2106 is the form normally used for
employee business expenses, but only for travel and entertainment
costs and a few other things. For all other employee business
deductions one MUST itemize and include the information there. For
people who are not already itemizing, this means that your effective
deduction is probably going to be less than you might have hoped.
Sorry for the repeated corrections; I'll try to do better...
--
D Gary Grady
Duke U Comp Center, Durham, NC 27706
(919) 684-3695
USENET: {seismo,decvax,ihnp4,akgua,etc.}!mcnc!ecsvax!dgarydgary@ecsvax.UUCP (D Gary Grady) (02/07/85)
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Drat, drat, drat. Another error in what I said before:
It is NOT possible to deduct a computer used for business purposes
on form 2106 (as I suggested). 2106 is the form normally used for
employee business expenses, but only for travel and entertainment
costs and a few other things. For all other employee business
deductions one MUST itemize deductions on Schedule A. For
people who are not already itemizing, this means that your effective
deduction is probably going to be less than you might have hoped.
Sorry for the repeated corrections; I'll try to do better...
--
D Gary Grady
Duke U Comp Center, Durham, NC 27706
(919) 684-3695
USENET: {seismo,decvax,ihnp4,akgua,etc.}!mcnc!ecsvax!dgary
--
D Gary Grady
Duke U Comp Center, Durham, NC 27706
(919) 684-3695
USENET: {seismo,decvax,ihnp4,akgua,etc.}!mcnc!ecsvax!dgarydgary@ecsvax.UUCP (D Gary Grady) (02/07/85)
<>
Drat, drat, drat. Another error in what I said before:
It is NOT possible to deduct a computer used for business purposes on
form 2106 (as I suggested). 2106 is the form normally used for
employee business expenses, but only for travel and entertainment costs
and a few other things. For all other employee business deductions one
MUST itemize deductions (on Schedule A). For people who are not
already itemizing, this means that your effective deduction is probably
going to be less than you might have hoped.
Sorry for the repeated corrections; I'll try to do better...
--
D Gary Grady
Duke U Comp Center, Durham, NC 27706
(919) 684-3695
USENET: {seismo,decvax,ihnp4,akgua,etc.}!mcnc!ecsvax!dgary