How to depreciate parts for a computer I built?

[DaveLaQ]

The individual parts vary in cost from $50 to $50. Depreciate individual parts over $200 each? Depreciate all the parts used to build the computer as one item, using the sum of their costs? Depreciate as a unit only those parts costing over $200?

Or, in the case of, say, the $450 CPU chip (or any of these parts, actually), since it's a part and not a usable asset unto itself, does it get around the need to depreciate at all?

[DoninGA]

You do not depreciate repair parts.  Those are repair expenses you can total and enter on the Schedule C.

[Critter-3]

If you got the parts and built the CP yourself then if the total cost was less than $2500 you can simply expense the cost ... depreciating is not needed. 

[Carl]

I assume you built the computer and that you did "NOT" repair a computer.

If you built the computer for use as a business asset in a business that you own, then the entire cost of the computer is entered as such in the Business Assets section of the SCH C and it gets depreciated over 5 years.

Take note that you can only claim the total cost that you actually paid. The value of your time and your labor is not included in the cost, since your time and labor is not taxable anyway.

[DaveLaQ]

Wow. Couldn't find this info anywhere. Yes, I built the computer for my audio recording and production business. Do you have a link for further reading? Or is this more of applying more general rules to my specific situation?

I bought around 15 components from three or four different vendors. Still lump them all together for the depreciation?

[DaveLaQ]

@Critter-3  -- do you mean to expense it via section 179 or one of the other tools? Or straight-up expensing of the components as if they were something like supplies?

[DaveLaQ]

To be clear, I built a new computer for my sole proprietor business essentially from scratch, buying the parts and putting them together.

[tagteam]

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@DaveLaQ wrote:

@Critter-3  -- do you mean to expense it via section 179 or one of the other tools? 

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You can use the de minimis safe harbor election as @Critter-3 mentioned.

See https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations

[Carl]

If the cost of each computer was less than $2,500 then you have the choice to list them as assets and depreciate over 5 years, or you can just expense them under Safe Harbor De-Minimus. I would recommend you expense them, if your business has generated sufficient income for the tax year to make it worth while.

If the cost of each computer was more than $2,500, then expensing is not an option. You have to list them as a business asset and depreciate over 5 years.

[DaveLaQ]

So there appear to be two different approach philosophies represented here. The first is to treat the parts as discrete, unrelated items. The second is to treat them as parts of the whole to which they are intended to complete. Any referenced IRS regulation would be most appreciated in order to definitively suss this one.

[tagteam · Accepted solution]

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@DaveLaQ wrote:

The first is to treat the parts as discrete, unrelated items. The second is to treat them as parts of the whole to which they are intended to complete. 

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The de minimis safe harbor applies per invoice. Therefore, if you purchased the components separately, and were billed separately, the $2500 maximum is applicable to each component. 

See Tangible Property Final Regulations | Internal Revenue Service (irs.gov)

[DaveLaQ]

Great, thanks. And there's nothing in the tax code elsewhere saying parts intended to come together as components of a single asset must be treated collectively for deduction purposes? That seems to be the thinking in the other responses, here.

[tagteam]

Correct, nothing in the tangible personal property regulations indicating otherwise; the safe harbor is per invoice and does not mention component parts.