Where deduct tools used in home business?

[rwom1217]

I have a home business (LLC) that includes selling items I assemble from parts.  Am I able to deduct the cost of tools, containers, etc?

[tagteam · Accepted solution]

You can either depreciate the tools, containers, and machinery if their cost bases are significant, deduct them as supplies if their costs are minimal, or use the de minimis safe harbor for items that cost $2,500 or less.

See https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations

[rwom1217]

This was super helpful with the guidance graphics/arrows.  Thank you.  Is there a threshold where an item's cost requires it to be treated as an asset vs a misc expense, or is it my choice?

[tagteam]

$200 or $2,500 or less for the safe harbor de minimis election.

[rwom1217]

OK, I could use a bit more direction.  I purchased a used laptop for $500, and a used safe for $1140. (I also bought some storage bins for parts.)  I lean toward the simplicity of just deducting them once this year rather than having to keep track of things for multiple years.  That said, it sounds like doing so would require attaching a statement titled "Section 1.263(a)-1(f) de minimis safe harbor election".  Does Turbo Tax recognize this and do it for me, or do I have to create the statement on my own? 

Is there a way of simply taking a one-time deduction on these without any long-term tracking or extra statements?  (I know this may cost me extra $ over time.)

[tagteam]

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@rwom1217 wrote:

Does Turbo Tax recognize this and do it for me, or do I have to create the statement on my own? 

Is there a way of simply taking a one-time deduction on these without any long-term tracking or extra statements?  (I know this may cost me extra $ over time.)

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TurboTax will generate the statement, which will wind up in your return package.

This is, in fact, a one-time deduction so there is nothing to track. Your basis, however, for these assets would be reduced to $0 which would be a factor if you ever sell them.

[rwom1217]

What are the implications of selling an item with a basis of $0?