Business

[Scoop980]

We have a small business, 6000 only in profits. How do I handle small tools, like sander $44; glue gun $33; paring knife kit, $22 , but one knife at $159.00

[Irene2805]

If the tools/equipment are hand tools, you can take their cost as a deduction under supplies along with the paper/ink, etc.  These smaller purchases are handled as Expenses.

To enter these items, please follow these steps:

1. Click on Income and Expenses and then click the Start/Revisit box in the Self-Employment section.
2. On the Your 2019 self-employed work summary screen, click on Edit next to your business. 
3. You will be on the  Here's your [business] info screen.
4. Click on the box Add expenses for this work.
5. On the next screen, Tell us about any expenses… mark the radio button next to Supplies and click Continue. 
6. Enter the supplies expense on the next screen.

If the tools/equipment are large purchases (typically more than $2,500 each) you can enter them as assets and depreciate them over time. Such items are used in your business for longer than a year.  These items are tracked in the Assets section.

Depreciate the Asset

1. If you have already added some assets, click on the Edit box next to Assets in the Expenses section. 
2. On  the screen, Do you want to go directly to your asset summary?  mark the Yes button and click Continue.
3. On the Business Asset Summary screen, you can add, edit or delete assets already entered. 
4. If you haven’t yet entered any assets, click on Add expenses for this work. 
5. On the next screen, Tell us about any expenses… mark the radio button next to Assets and click Continue. 
6. Continue through the screens, entering the requested information.

[Scoop980]

Wouldn’t the knife for $159.00 be depreciated? It will last many years

[Irene2805]

No - I agree that the $159 knife (and other tools) in reality might last for several years, but as an accounting/tax practice the cost is normally treated as an expense and not depreciated.

In the end, there is no rule that says you cannot depreciate assets you purchased that otherwise would be expensed. But once you start items on depreciation they stay on the depreciation schedule through their expected life.

[Scoop980]

Should those small hand tools previously listed go as section 179 or office expenses. ?

[DawnC]

Those small items can be expensed.  You can include them in supplies expense, see Irene's instructions above.  Or, you can put them in office expenses if you choose to, the results will be the same.  Just be sure to keep detailed records of all of your expenses.  And don't report them in both places. 😉