Itemizing startup tools and equipment.

[dmiller151]

I started a fabrication business last year and purchased tools and equipment ranging from $50 to $6000. Do I need to record each and every purchase I made or just a total? Also, what about the equipment that costs less than $200. Do I record that under expenses instead of startup? Confused. Thank you for any advice.

[MinhT1]

Startup costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business.

Tools and Equipment aren't startup costs.

If you make the de minimis safe harbor election, you can expense tools and equipment with a unit cost of $2,500 or less.

Tools and equipment with a unit cost of more than $2,500 have to be capitalized and depreciated.

[dmiller151]

Thank you for your answer.  I am still somewhat confused as I have read conficting information on this subject. If this is not a startup expense, can I still deduct up to $5000 the first year? Do I need to itemize every purchase? Where do I record this?  Thank you again

[MinhT1]

As this isn't a startup cost, you can't deduct $5,000 the first year.

For items costing $2,500 or less each, you don't need to itemize every purchase but can list the total as an expense under Miscellaneous expenses and described as Tools costing less than $2,500 each. Remember to make the de minimis safe harbor election.

For tools costing more than $2,500 each, you enter each one as an asset and depreciate them over their useful life.

For larger items, another option is electing section 179 and deducting the entire cost in the first year.

See this IRS document.