Can I deduct a computer as a business expense for some independent consulting work I am doing and need to upgrade my system to properly help my client?

[Critter]

Sure ... read pub 535...

If you are new to being self employed, are not incorporated or in a partnership  and  are acting as your own bookkeeper and tax preparer you need to get educated ....  

If you have net self employment income of $400 or more you have to file a schedule C in your personal 1040 return for self employment business income. You may get a 1099-Misc for some of your income but you need to report all your income.  So you need to keep your own good records. Here is some reading material……

IRS information on Self Employment….
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center 

Publication 334, Tax Guide for Small Business
http://www.irs.gov/pub/irs-pdf/p334.pdf 

Publication 535 Business Expenses
http://www.irs.gov/pub/irs-pdf/p535.pdf 

Home Office Expenses … Business Use of the Home

https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

https://www.irs.gov/pub/irs-pdf/p587.pdf

                                       

There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Self Employed return and will help you keep up in your bookkeeping all year along with calculating the estimated payments needed ....
http://quickbooks.intuit.com/self-employed

Self Employment tax (Scheduled SE) is generated if a person has $400 or more of net profit from self-employment on Schedule C.  You pay 15.3% for 2017 SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  You do get to take off the 50% ER portion of the SE tax as an adjustment on line 27 of the 1040.  The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 line 57.  The SE tax is in addition to your regular income tax on the net profit.
 


PAYING ESTIMATES
For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% for 2017  SE Tax on 92.35% of your net profit in addition to your regular income tax on it. So if you have other income like W2 income your extra business income might put you into a higher tax bracket.

You must make quarterly estimated tax payments for the current tax year (or next year) if both of the following apply:
- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits. 
 
- 2. You expect your withholding and credits to be less than the smaller of: 
    90% of the tax to be shown on your current year’s tax return, or 
  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

To prepare estimates for next year, You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.

OR Go to….
Federal Taxes or Personal (H&B version)
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button

[Carl]

Can I deduct a computer as a business expense for some independent consulting work I am doing

Yes, provided the purchase is for use in a business that you personally own. If the total cost is less than $2,500 then you can just deduct it as an expense. Otherwise you have to depreciate it over either 3 or 5 years.

If the computer is "NOT" for 100% business use only, then that changes things.

[BRADY H]

Thank you. It isn’t my “business,” but rather an independent contractor type situation and I’ll get a 1099-misc here at the end of the year from the company I’m doing this for. The only thing I use my computer for is my online work with this company and I also officiate sports. So it would be used solely for those purposes. Thanks for your input.  

[VolvoGirl]

That is self employment income and expenses.  When you are self employed, independent contractor, freelance, etc. you DO have a business.  It's your own business. When you are self employed you are in business for yourself and the person or company that pays you is your customer or client.

[Carl]

It isn’t my “business,” but rather an independent contractor type situation and I’ll get a 1099-misc here at the end of the year from the company I’m doing this for.

Just to clarify things here. The IRS will disagree with that comment and you will lose. It "is" a business, and you own it. For the purposes of that income, as far as the IRS is concerned you are self-employed and "in business" for yourself. At it's lowest denominator, you are a sole proprietor and your business is a sole proprietorship. All business income and expenses will be reported on SCH C as a physical part of your personal 1040 tax return. It doesn't matter if you're filing a joint return either.