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Posted by Todd H. on February 24, 2007, 4:43 am
>
> > 1. I bought a new computer this year and I used it for freelance
> > earning around 4k this year. Can I take this computer off on taxes, if
> > so does this deduction stack with the 5150 standard deduction? Do I
> > have to spread it over 5 years? How do I determine how much each year?
>
> If the computer was used exclusively for business, and was used at
> business locations, then it can be treated as a business equipment
> purchase. If the computer has any games on it, or is located in
> a part of your house where your family has access, or was used
> for any personal business, then it is not a business tool and
> likely cannot be deducted.
Your second sentence here is likely not accurate advice.
I'd direct Shane to this IRS publication which talks about shared
business and personal use of an asset. Percentages of business vs
personal use are available:
http://www.irs.gov/publications/p535/ch01.html#d0e613
An as to the game issue... the corporate laptops I've been issued by
my employer came with games on it. It is quite certainly a business
tool and I'm certain they write off the lease $ for it. They realize
that employees sometimes sit in airports and in hotels and might not
be working 24/7.
> This has nothing to do with the standard deduction. Standard
> deduction is a 1040 item. Business equipment goes on schedule C.
> You have two options...you can depreciate it over the live of
> the equipment, or you can take an accelerated deduction and write
> it off all in one year. Your choice.
Shane, check out the following FAQ's (where writing it all off in one
year = section 179 deduction)
http://www.irs.gov/faqs/faq-kw16.html
and any of the the several tax newsgroups as this topic is likely to
get closed by our moderators as none of this really hits on financial
planning. The publication for small business will also be something
to read http://www.irs.gov/publications/p334/index.html and pub 535
speaks to what is deductible in detail
http://www.irs.gov/publications/p535/index.html and this pub talks
about the decision to section 179 an expense in one year or to
depreciate it http://www.irs.gov/publications/p946/index.html
However, if this is your first time filing a schedule C you might at
least consider finding a local CPA that does personal income tax
(note: these are different than Hewitt, or the H&R Block or similar
punchkey monkey tax services) to do your taxes this year since you
raise a few questions here that you might be assured of by a pro. And
it won't cost much.
On the other hand, filing a schedule C is remarkably easy with modern
tax software, but the first time going through all the business
deductions and where to put things, whether to depreciate or section
179 stuff can be a bit confusing. Personally for me, if I had $4000
of side income on the + side, I'd section 179 that computer on my
schedule C to reduce my taxable income from that business endeavor and
offset as much of that income as possible.
Best Regards,
--
Todd H.
http://toddh.net/
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