What year can I expense the purchase of my laptop?

[hs101]

I purchased a 1000 dollar laptop on November of 2023 with the intention to primarily use it in my business as a freelance software engineer. I made no income in 2023. I did not start making income until January of 2024. Do I write off the laptop as an expense for the tax year of 2023 or can I write the entire cost of the laptop in the tax year of 2024 since this is when I started making income?

Since I made no income in 2023 it seems that it doesn't make sense for me to write it off for that year.

[Bsch4477]

You can expense it in 2024. 

[hs101]

Thanks for the quick response. 

Could I expense the entire amount in 2024 or would I have to depreciate it over 5 years?

Also, would it make a difference how much I can expense it if I intend to use the laptop as 80 percent business/20 percent personal vs 100 percent business.

[MinhT1]

As the equipment costs less than $2,500, you can expense it by making the de minimis safe harbor election.

If you only use it 80% for your business, you can only claim 80% of its cost as a business expense.

[Opus 17]

If you were actively engaged in ongoing business activities with a profit motive in 2023, then you file a schedule C for 2023, even if your first customer didn't pay you until 2024.  You will show a loss that can be carried forward to offset future profits.  List the computer as an asset.  Since it was under $2500, you have the option of depreciating it over time or taking the entire cost as an expense.  You are correct that if it will only be used 80% for business, you only deduct or depreciate 80% of the cost.  In addition, if you expense or depreciate 80% of the cost, your new adjusted cost basis is about $200.   This is important because, if you sell the computer (used, trade-in, etc) at any time in the future, if the selling price is more than the adjusted cost basis, the difference is business income (because you are recovering some of that expense you previously deducted.)

If you did not start active and ongoing business activities until 2024, then you report all your business activities on your 2024 tax return, including placing this computer "in service" for the business. 

[hs101]

This is very insightful and I appreciate the detailed reply. I  did not start active and ongoing business activities until 2024.  So in my case, I can simply deduct the full 800 dollars (assuming 80 percent use) of the laptop on my 2024 tax return?  So there's no extra steps and this expense wont belong in a different category of deductions for the 2024 tax return since it was technically bought last year?

[Opus 17]

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@hs101 wrote:

This is very insightful and I appreciate the detailed reply. I  did not start active and ongoing business activities until 2024.  So in my case, I can simply deduct the full 800 dollars (assuming 80 percent use) of the laptop on my 2024 tax return?  So there's no extra steps and this expense wont belong in a different category of deductions for the 2024 tax return since it was technically bought last year?

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You "place the asset in service" as of the date you first start using it for business, whenever that is.

Your basis for depreciation is a bit more complicated.  If you convert property from personal use to business use, your basis is the fair market value at the time (in this case, what a 2 month old used computer would sell for).  However, if the property was always intended for business use and was held for business use until you started the business, you can use the purchase price.  (Or in your case, 80% of the purchase price.)