@mexbarajas wrote:
So many questions, I'm trying to understand the basics, reading all IRS material I can find, I want to reduce my taxable income but also i want to do the right thing before the end of year, as this is the first year I have been using an old computer I had, also have been using my old tools that I used at home, so I guess for a new business there must be some good advices before the end of year to get ready for next year and also take advantages of write offs, tax deductions and actions that I should be thinking on today,
I can see myself talking to a CPA next year to do my taxes and then get the typical " you should have done this before the end of year"
that's the type of advice I'm looking for
So, why do you think random strangers are a substitute for a CPA? We can review some basic principles, but this is really not the place for back and forth discussion that will take your unique situation into account.
Regarding a computer, for example. I will start by assuming it is an "ordinary and necessary" expense of your business. For the simplest case, I will assume that you will purchase a computer for 100% business use.
In that case, if the cost is less than $2500, you can deduct it as an expense in the year you place it in service in your business (begin using it for business). If more than $2500, you have to depreciate the computer (take it's wear and tear into account over time rather than all at once). You can choose standard depreciation, bonus depreciation, or section 179 depreciation, each of which has advantages and disadvantages, depending on how long you will be in business and how often you need to replace the computer. (A video editor might need to replace their computer much more often than a painter who only uses the computer to track expenses and make customer appointments.) The three kinds of depreciation are probably too much to get into here, though, and that's the simple case. If the computer will partly be for business and partly personal use, it gets more complicated.
In general, expenses are deducted against income when they occur. Assets are accounted for when they are placed in service, which is not necessarily when they are purchased. (Assets generally are property that cost more than $2500 and have an expected life of more than 1 year.) So if you know you have a profit this year that will be taxable, and you know you have items to purchase for your business, it will generally be better to incur those expenses before the end of the year to reduce your taxable income. But that is not always the case, which is why personal advice is so important.
