While business equipment, like other business property, must usually be depreciated, you may be able to deduct the full cost of business equipment in some circumstances. This deduction is called a de minimis safe harbor, meaning that it's an exception for small amounts. Here are the requirements:
If your business has what the IRS calls an "applicable financial statement," you can take a business tax deduction in the year you bought the equipment for amounts paid for business equipment up to $5,000 per item, with an invoice.
If your business doesn't have an applicable financial statement, you can take a business tax deduction for $2,500 per item, with an invoice, in the year you bought the equipment.
You must also notify the IRS on your tax return that you are taking this deduction.
if the cost of an item is above that it must be depreciated. if the business has enough profits you can use section 179 to fully expense the item in the year placed in service. you can also use bonus depreciation but for 2024 it's limited to 80% of cost after any 179 deduction. you have have options as to how much depreciation to take in the year acquired. if you are in a low tax bracket and expect profits and tax brackets to increase in ensuing years you may not want to take the maximum amount for 2023
Applicable financial statement For purposes of this subsection, the term “applicable financial statement” means— (A) a financial statement which is certified as being prepared in accordance with generally accepted accounting principles and which is— (i) a 10–K (or successor form), or annual statement to shareholders, required to be filed by the taxpayer with the United States Securities and Exchange Commission, (ii) an audited financial statement of the taxpayer which is used for— (I) credit purposes, (II) reporting to shareholders, partners, or other proprietors, or to beneficiaries, or (III) any other substantial nontax purpose, but only if there is no statement of the taxpayer described in clause (i), or (iii) filed by the taxpayer with any other Federal agency for purposes other than Federal tax purposes, but only if there is no statement of the taxpayer described in clause (i) or (ii), (B) a financial statement which is made on the basis of international financial reporting standards and is filed by the taxpayer with an agency of a foreign government which is equivalent to the United States Securities and Exchange Commission and which has reporting standards not less stringent than the standards required by such Commission, but only if there is no statement of the taxpayer described in subparagraph (A), or (C) a financial statement filed by the taxpayer with any other regulatory or governmental body specified by the Secretary, but only if there is no statement of the taxpayer described in subparagraph (A) or (B).
