Fixed Assets

[Countingcat]

We have paid for half of a piece of equipment for our business in 2024. The remainder will be paid in 2025 with the equipment being delivered in February. We use cash accounting. How do I record the payments made in 2024? This is a depreciable asset.

[MinhT1]

As the equipment is placed in service in February2025, you can only enter it as an asset and start depreciating it in 2025.

In 2024, you do not record the payment made in 2024 as an expense. If you have to submit a balance, it would be a current asset called Prepayment.

[VolvoGirl]

You don't enter what you paid.  You enter it as an ASSET and  take depreciation on it.   The deprecation is the expense.  If you paid any interest on it  you can expense the interest.  

[Countingcat]

Can I show the payments made this year as payments toward a liability?

[Countingcat]

Is there any provision for expensing what we have paid so far on this asset? We had to pay a certain amount down just to place the order. The equipment is manufactured and customized when the order is placed and takes several months to complete. It is common for such equipment to bridge calendar years. The total cost is about $600,000 and we have paid about 50% in 2024.

[Shannon B1]

Since you haven't received the asset yet, you can't expense the amount you paid in 2024. It's considered a deposit, and deposits aren't expenses.

For your 2025 taxes, you'll record the equipment as a fixed asset for the full amount you paid and take a depreciation expense.

You can only deduct the interest portion of any payments you made in 2024.