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stringtheoriesguitar
Returning Member

Categorizing as an expense or an asset (179 Special Depreciation)

Hello,

 

I'm a self-employed guitar teacher and I've purchased guitar pedals throughout the years to use in my business.   Typically, I've previously classified these as assets as they realistically have a useful life of over a year and fit the other classifications listed.  I've employed the 179 special deduction, but turbotax frequently prompts me to place them in the expense category as most of these cost less than $200.  Any guidance would be appreciated, my assumption though is they would technically fall under an asset as they fit that criteria, but I'm effectively expensing them still with the 179 depreciation.

 

Thanks,

Harold

3 Replies
AnnetteB6
Employee Tax Expert

Categorizing as an expense or an asset (179 Special Depreciation)

You can use either method, just expensing the cost of the pedals or entering them as an Asset and using the section 179 deduction.  

 

You are correct in the assumption that because the pedals have a useful life of more than a year that the item would normally be classified as an Asset for depreciation.  However, the guidance has changed within the last few years (2016 and later) to allow you to expense certain items instead of depreciating them if your business meets certain requirements.  This is the De Minimis Safe Harbor Election. 

 

TurboTax will give you guidance on the screen to be sure that you qualify to expense the items instead of depreciating them and taking the section 179 deduction.

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stringtheoriesguitar
Returning Member

Categorizing as an expense or an asset (179 Special Depreciation)

Hi Annette, thank you for your response!  Because I've already done previous years claiming similar items as assets using the 179 special depreciation, would it best to continue this practice or is it safe to move these to expenses (I'm assuming miscellaneous expenses) when prompted by TurboTax?  In the message it was prompting me when items were below $200 to just go ahead and expense.

JohnB5677
Employee Tax Expert

Categorizing as an expense or an asset (179 Special Depreciation)

If the item costs less than $200 you should simply expense it.  If you are unsure whether to depreciate a cost or to expense it right away, consider the benefit to your company.

 

For example, a vehicle or a machine may provide a longstanding benefit to your company beyond a few years.  In this case you would probably choose to depreciate it.

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