Business assets or expenses?

My business does data processing (data transaction validating).  Are the computers that I use to do the validating considered assets or expenses?  The first year (2017) I had a revenue of just over $7k, but had nearly $60k in expenses and/or asset purchases.  The second year (2018) I had a revenue of just over $50k with about $30k in expenses and/or asset purchases.  Last year (2019) I had about $14k revenue and I don't even know what the expenses/assets are yet.  I'm probably getting out of the business this year and just want to know the best way to about all this.  And yes, I'm just now going back and amending my previous couple of returns as there is more guidance now on the tax rules for my business.

ReginaM
Expert Alumni

Business & farm

If the cost is less than $2,500, then you can enter it as a Other Miscellaneous Business Expense, or if it is more than $2,500 you will enter it as an Asset  where you find the Section 179 election.

 

To enter as a Miscellaneous Expense:

  1. While inside the software and working on your return, type Schedule C in the Search at the top of the screen (you may see a magnifying glass there). There will be a popup that says Jump to Schedule C.  . 
  2. select Edit next to your business,
  3. scroll to Business Expenses,
  4. then, Other Common Business Expenses,
  5. select, then on the next screen you will see categories and can choose Other Miscellaneous Expenses

After selecting Other Miscellaneous Business Expenses, you will be able to type a description and the amount.  For the description write "Safe Harbor Asset" or something similar next to the Computer Name.

 

To enter it as an Asset and take the Section 179:

  1. Business Income and Expenses
  2. select Edit next to your business 
  3. scroll to Business Assets
  4. Enter the details of the computer purchase (Date, purchase amount, description)

On the following screens you will be able to elect to Expense all or some of the cost (if you have a net profit).

 

Follow through all the areas in the Business section of the TurboTax software and it will provide you with a lot of assistance. You'll notice blue links that have more information and details about the particular sections that will be extremely helpful.   

 

Here is a link to Publication 946 which will provide helpful information in regards to depreciating your assets.

 

Should you have further questions in regards to your business computers, please respond to this thread.

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Business & farm

Hey Regina,

 

I have another add-on question.  I do have some computers that are over $2500.  During my research I read, "Computers and related peripheral equipment. Computers and related peripheral equipment placed in service
after 2017, in tax years ending after 2017, are no longer
treated as listed property."  What does that mean?

 

 

Thanks

JamesG1
Expert Alumni

Business & farm

IRS publication 946 defines listed property below.  In the publication, go to the bottom of the document into the glossary.  Find ‘listed property’ and click the hyperlink.

 

‘What Is Listed Property?

Listed property is any of the following.

  • Passenger automobiles (as defined later).
  • Any other property used for transportation, unless it is an excepted vehicle.
  • Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video recording equipment).’

Listed property is equipment or assets that have both a personal use and business use.  The IRS is concerned that deductions related to these assets can be misused.  A good explanation is here.

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