@GeorgeDenseff
@house14
I don’t believe these answers make any sense for a multi member partnership. A partnership with more than one member must file a form 1065 partnership tax return, that issues a K-1 statement to each partner. The K-1 statement lists the partner’s share of income and expenses which are passed on to the partner’s individual tax return. The partner does not have a schedule C on which to list separate business expenses. Since other work-related expenses are disallowed for tax year 2018 through 2025, I can’t think of any way that a partner could deduct on their personal tax return the cost of business equipment purchased with personal funds.
What should be happening is that the partnership buys the business equipment, or the partnership can reimburse the individual partner (if the partner used personal funds) as long as the partnership keeps a copy of the receipt to prove that it was a business expense. If one partner purchases business equipment with their own funds, this is essentially transferring part of the partnership income to the other partner. If this is equipment necessary to run the business, then the owners of the business should share equally in the expense.
I don’t think there is any way on the tax return forms that a partner who files a K-1 statement can deduct additional business expenses that were not reported on the 1065. Even if I am wrong and the expense could be deducted by the individual partner, it still represents a cost transfer which enriches the other partner.
It’s also not true that you could deduct unlimited number of computers. The business can only deduct “ordinary and necessary“ expenses. In this case, the limit on the number of laptops you could purchase is the number which represent “ordinary and necessary“ expenses for this particular business. If the business has two members and no other employees, you might justify more than two computers, but I don’t think you could justify an unlimited number. The number of computers you can deduct as a business expense is the number that is necessary to conduct your business.
Secondly, the safe harbor for taking an expense deduction instead of depreciating business equipment is $2500 per invoice or per item as established on an invoice. Any computer costing more than $2500 must be placed into service as a depreciable asset and depreciated over time. It may be eligible for section 179 depreciation, but that is different then the safe harbor expense method in several important ways.
Third, if you want to claim that a personal computer that you buy is used to 75% for business and 25% for personal, and you deduct 75% of the cost as a business expense, if you are audited, you will need some kind of reliable written record to establish your business use percentage.
Fourth, if you buy computers (or any other asset) for your business and you deduct the cost as an expense, your cost basis is now zero. That means that if you ever sell the computers (or other assets), even as used, the entire proceeds from the sale is taxable business income.
I suggest that you dedicate the computer 100% to business use so it is a legitimate business expense, then either have the business purchase the computer or have the business reimburse you fully. That way, the cost of this (presumably necessary) piece of business equipment is shared equally by the partners. If you also want a fancy new laptop for personal use, you should buy it on your own.
