Can I write off my laptop I bought primarily for my business?

[SnxCreator]

My laptop is used over 50% for business.

[LinaJ2018]

Yes, you can deduct ONLY the business portion or percentage of using the laptop. 

If you use the computer in your business  more than 50% of the time, you can deduct the entire cost under a provision of the tax law called Section 179. 

For example, if you use your computer 60% of the time for business and 40% of the time for personal use , you can deduct only 60% of the cost. If your computer cost $1,000 you could only deduct $600.

If you use an item for business less than half the time, it won't qualify for Section 179 and you will have to deduct the cost a portion at a time over several years--a process called depreciation. 

For example, if you use your computer 40% of the time for business and 60% of the time for personal use, you can only depreciate 40% of the cost. If your computer cost $1,000 you could only depreciate $400.

Office equipment such as a computer is deducted over five years.

[scamposanto]

Do you base the percentage on the average 5 day work week? So a traditional 40 hr work week?

[Daind]

My Friend Samantha is trying to buy a laptop for her new business however the business does not have a 1099, and it's not on the books like that.  It's through a company called Monat, she bought rights to sell their products she builds her own personal client base herself. I was wondering if she could still write off a laptop for something like this.  She is buying a laptop specifically to help with the business, so she can have a calendar to look at while taking calls on her phone.   And probably will not be using it for anything else as she has a desktop and phone. Unfortunately, she wants a Macbook air and they are expensive for what you're actually getting.  I'm a pc guy myself if you couldn't tell.

[pk]

Having gone through the above interchange, and generally agreeing with @LinaJ2018 ,  just want to make sure you understand that  (a) can you "write off"  is yes, the question is how much and also should you;  (b)   one has to recognize that an item is eligible for business expense deduction if and only if , it is customary,  essential and usual to use such a tool and the tool is generally used exclusively for the production of income during a dedicated period; (c)  for a 50% business use  of a $3000 tool with a life of 5 years,  means your  depreciable basis  is $1500 and therefore it is $300 per year against  the business income; (d) business losses are limited to $3000 per year and the suspended losses  (NOL) is carried backward and forward;  (e) for  a business to be recognized as a business ( income motive )  and not hobby( no losses recognized ) it must be profitable at least 3 out of five years ( there are ifs and buts in this ); (f) when there is  gain disposing of assets  with depreciation, there is a requirement  of recapture i.e. gain being treated as ordinary income rather than capital  gain .  

Therefore, it is advisable that you consult a tax professional  as you start on this business venture -- there are lots of pitfalls ( and obviously opportunities ).

[Rainman12]

You must keep written records of ALL usage to justify percentage.

[lameri]

I would like to know where to do it? Will it be in Schedule E?

I have rental property although I am not a real estate professional, but a computer is essential.

I have read all the rules, but now I don't know where to add the deduction.

Thanks!

[pk]

You declare a new asset, like you did for the rental property ( to get depreciation ) -- except in this case you invoke  section 179 so it is 100%  deducted from your rental gross.

Note that the asset has to be used more than 50% for business ( i.e. exclusively and regularly).   Keep good records -- IRS often looks at these  things with a jaundiced eye.

Do you need more help ?

[lameri]

@pk Thank you, that was super useful. I now see it populated in form 4562, but I do need more help 🙂

For some reason I see it populate line 13 ("Carryover of disallowed deduction to 2020"), so it can't be used this year after all? It is not hitting any limits as it is my only deduction ($500).

9 Tentative deduction. Enter the smaller of line 5 or line 8 ------- $500

10 Carryover of disallowed deduction from line 13 of your 2018 Form 4562 -------- Empty

11 Business income limitation. Enter the smaller of business income (not less than zero) or line 5. See instructions ------- $0 

12 Section 179 expense deduction. Add lines 9 and 10, but don’t enter more than line 11 ------- $0

13 Carryover of disallowed deduction to 2020. Add lines 9 and 10, less line 12 ------- $500

Any idea? Thanks a lot, it is my last issue to resolve and then I can file!

[lameri]

@pk I think I understand it now: since this computer is used for a rental that didn't have any income in 2019 (it got rented out in January of 2020), I cannot actually get the deduction until 2020, that it will show the income. Am I right? If I am, that would be awesome because I would be done with taxes!

Well, I wonder why a "foreign tax credit" didn't actually have an impact either, so if you know that bonus question, that'd be great, although for that I guess I can wait 🙂

Many thanks, again!

[pk]

@lameri , did you have a positive income  from your business  ( without regard to section 179 deductions ) -- you cannot claim this deduction unless you have positive income.  What is your income from your rental business?

See instructions for  form 4562-->  https://www.irs.gov/pub/irs-pdf/i4562.pdf     page  4 top right

By the way how many rental properties do you have -- if audited, you would need that info to prove that this was essential , usual/ customary and  reasonable. 

[lameri]

@pk: I have two rentals. On the whole, they make money, but the one I used the asset for so much (more than 50%) is for the one that didn't make money in 2019 (it was rented out in January of 2020).

I followed the many TurboTax questions in adding it as an asset (the way you showed me). At that point my tax return had all the information about the rentals, so I hope that TurboTax figured this out correctly putting it in carryover 🙂

[pk]

@lameri I can answer your foreign tax credit questions but you have to tell me  (a) what type of foreign income; (b) to which country did you pay the tax to; ( c) is this  like from a mutual fund investing in international markets and  paying taxes to foreign countries on dividend / interest etc. ; (d) what is the total amount of foreign tax   --- is it above the safe harbor amount ( $300 for single filer and $600 for joint filers ) ??

[lameri]

@pk Thanks a lot. It is a mutual fund (RIC) that includes ~$900 of foreign tax.

As I can see from the IRS site:
Taken as a deduction, foreign income taxes reduce your U.S. taxable income. Taken as a credit, foreign income taxes reduce your U.S. tax liability.

I chose to take the credit, but since I have no taxable income this year, that seems to be the reason for it not to make a difference. In order to take the deduction, I would need to itemize (correct?), but the standard deduction was better for me, so I am not itemizing. In sum, TurboTax has put it in the carryover section.

[pk]

@lameri , you are correct.

stay safe