topic Depreciate or Expense drones purchased for under $2,500 each in Deductions & credits

Depreciate or Expense drones purchased for under $2,500 each

BCholt12 — Tue, 09 Mar 2021 06:03:59 GMT

Purchased two drones under $2,500 each. Should they be depreciated or expensed? One came with extras/accessories. If this drone bundle is depreciated and the drone only has to be removed how would the cost be calculated?

Re: Depreciate or Expense drones purchased for under $2,500 each

AnnetteB6 — Tue, 09 Mar 2021 14:39:45 GMT

If the drones are more than 50% business use, then you can either depreciate them or use Section 179 to deduct the cost in the current year. They would also qualify for the safe harbor expense.

The answer to which method to use is determined by your business situation. If it will be more beneficial to spread the deduction over a few years in order to reduce your future income, then you should depreciate them as business assets.

As for what to do about the drone that was bundled with accessories, research what the cost of the drone on its own would have been and use that for the depreciation cost. The remaining bundle cost for the accessories could be deducted as a business expense. Just be sure to keep notes about how you determined the breakdown in cost for depreciating the drone by itself.

Re: Depreciate or Expense drones purchased for under $2,500 each

Opus 17 — Tue, 09 Mar 2021 15:00:03 GMT

Durable equipment (with an expected useful life of more than one year) must always be listed as a business asset, never as supplies or an expense. If you qualify for the safe harbor or section 179 that would allow you to take the cost as an expense in one year instead of depreciating the assets, Turbotax will give you the option. But always start by listing the items as assets.

Re: Depreciate or Expense drones purchased for under $2,500 each

DianeYTC — Wed, 05 May 2021 14:02:34 GMT

What about the accessories for drone? Should they be expensed? If so, to what account? Or should they be booked as assets also? Thanks

Re: Depreciate or Expense drones purchased for under $2,500 each

DaveF1006 — Thu, 06 May 2021 02:52:27 GMT

You cannot book them as assets and expense them at the same time. They would be listed as other miscellaneous assets.

Re: Depreciate or Expense drones purchased for under $2,500 each

Opus 17 — Thu, 06 May 2021 14:51:41 GMT

@DianeYTC

I don’t know what you mean exactly by accessories. Generally, an item that has a useful life of more than 1 year will be an asset. Things like replacement blades and batteries would not be assets because they probably don’t have an expected life of more than 1 year (even though they might last that long with careful use). But this will be context specific—the battery set up for a commercial solar power installation would certainly be an asset. And you probably can’t split costs— if you buy a complete drone package that includes replacement batteries or blades, you generally can’t split the cost of the single purchase into an expense for the smaller parts and an asset for the larger parts.

It shouldn’t be too hard for you to figure out in context how you should treat your business expenses. For a photographer, an expensive camera is an asset but memory cards would be supplies. For a carpenter, an expensive tablesaw would be an asset but screws and nails would be supplies. And so on.