How to Deduct the Cost of Replacement Business Computers

Most business managers recognize the need to replace selected computers every few years. Despite the cost, the upgraded technology is often one of the keys to remaining competitive. Although a tax deduction is available for computer equipment, the deduction is not always as straightforward as that for other asset types.

As with most other business assets, the cost of office computers is recovered through a tax deduction for depreciation. The cost of computers and peripheral computer equipment is normally deducted over a depreciation period of five years. However, you may be able to deduct the entire cost of new computer equipment in the year of acquisition.

Understand Section 179 deduction

Section 179 of the Internal Revenue Code allows a deduction for up to $500,000 of the cost of acquired business assets. The Section 179 deduction is taken up front, so regular depreciation is available only on any remaining asset cost. In many instances, the Section 179 deduction limit exceeds the cost of acquired assets.

Keeping track of annual depreciation requires a certain amount of accounting work each year. By deducting the entire cost of computer equipment in one year, your ongoing accounting burden is lessened in upcoming years. The Section 179 deduction is optional. If the higher write-off is not useful in the year of acquisition, you may deduct the cost over the regular 5-year period.

Consider home-based business computers

An additional consideration comes into play if you are replacing computer equipment in a home-based business. Because some types of assets lend themselves to personal use, the IRS classifies certain items as listed property. Automobiles and computers are considered listed property. As a result, you must determine if a home-based business computer is used at all for personal use.

If a listed property is partially used for personal use, only the business use portion is deductible. If the percentage of business use is not more than 50 percent, the Section 179 deduction is not available. To receive the full available deduction for a home-based business computer, ensure that a separate computer is available for all personal use.

Fill Out Form 4562

Listed property derives its name because it must be listed separately on IRS Form 4562 for each year it is deducted. In contrast, most other asset categories are reported separately on Form 4562 only for their first year of service. In subsequent years, the total depreciation deduction for non-listed property is entered on a single line of Form 4562. Contact services like Andrea Lawrence Tax Accountant Inc for more information on business tax services.

About Me

The Role Of Business Accountants

My name is Michael Winters and if you own a business and you don't have an accountant, you should read my blog. I didn't realize the importance of an accountant until my sister opened up a small business. She told me that she was going to hire an accountant and I wanted to know why. My sister explained why the duties of an accountant are essential for running a business. She explained that hiring an accountant was necessary for many things including getting a business started, for budgeting and to handle tax audits. After speaking with my sister, I did some research on my own to learn more about this type of job and the duties of accountants. After learning about the important role they play in a business, I wanted to share the information in a blog.

Search

Categories

Archive

Latest Posts

16 November 2018
Is your family dealing with the inheritance of a potentially large estate? This is a time when the worst traits can come out in people, even family me

4 September 2018
If accounting needs are growing and you don't want to hire a person to sit at a desk in your office all day, there are some different things that you

25 June 2018
Running a small business is about more than just the services that you intend to provide to others. Running a small business is also about money manag