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Small Business technology purchase

I have my small ebay business on the side as a hobby. I read that if I buy a laptop under $2500 I can use it as a deduction if its only for business. Can you share more about this? Am I able to do it every year? What if I buy a laptop at $1000 and tablet at $500, can I deduct both since its under $2500?

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Accepted Solutions

Small Business technology purchase

You can use the de minimis safe harbor election to deduct purchases of $2500 per invoice or item.

 

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

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ToddZ1
Employee Tax Expert

Small Business technology purchase

Hello @chica0533!  Thank you for your question.  

 

There are a couple of items that we need to clarify regarding your business.  You stated in your question that you have a "small ebay business on the side as a hobby."  The IRS treats small businesses and hobbies differently.  The IRS defines a hobby as an activity that you do purely for the love of it, regardless of the cost. You expect no profit in return.  If what you are doing on ebay is a hobby for you, then you would not be allowed to deduct any expenses for your hobby.  Alternatively, if you plan or expect to make money from your ebay business (i.e., you have a profit motive), then what you are doing on ebay is considered a business and you can deduct expenses. 

 

If you determine that your activities on ebay are a business, then you would be able to deduct the purchase of a laptop as a business expense.  You are allowed to deduct equipment costs of less than $2,500 in the first year.  You would claim that deduction in the year you purchased the computer.  You would not be able to deduct the purchase of that computer each year.   If you chose to purchase both a laptop and a tablet, there would need to be a business reason that you would need both pieces of equipment.  If there is a business reason for having both pieces of equipment, then you would be able to deduct the purchase price for both the laptop and the tablet up to $2,500 for each item.  

 

It is important to note that you can only deduct the portion of your equipment that is used for business purposes.  For example, if you use the laptop for business purposes 60% of the time and the remaining 40% for personal purposes, you are only able to deduct 60% of the cost of the laptop for a business expense.  If, however, you are using the laptop exclusively for business purposes, then you can deduct 100% of the cost of the laptop.   

 

The following is an article about taking business tax deductions that you might find helpful:  https://turbotax.intuit.com/tax-tips/small-business-taxes/taking-business-tax-deductions/L5RueYPVS

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View solution in original post

3 Replies

Small Business technology purchase

You can use the de minimis safe harbor election to deduct purchases of $2500 per invoice or item.

 

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

ToddZ1
Employee Tax Expert

Small Business technology purchase

Hello @chica0533!  Thank you for your question.  

 

There are a couple of items that we need to clarify regarding your business.  You stated in your question that you have a "small ebay business on the side as a hobby."  The IRS treats small businesses and hobbies differently.  The IRS defines a hobby as an activity that you do purely for the love of it, regardless of the cost. You expect no profit in return.  If what you are doing on ebay is a hobby for you, then you would not be allowed to deduct any expenses for your hobby.  Alternatively, if you plan or expect to make money from your ebay business (i.e., you have a profit motive), then what you are doing on ebay is considered a business and you can deduct expenses. 

 

If you determine that your activities on ebay are a business, then you would be able to deduct the purchase of a laptop as a business expense.  You are allowed to deduct equipment costs of less than $2,500 in the first year.  You would claim that deduction in the year you purchased the computer.  You would not be able to deduct the purchase of that computer each year.   If you chose to purchase both a laptop and a tablet, there would need to be a business reason that you would need both pieces of equipment.  If there is a business reason for having both pieces of equipment, then you would be able to deduct the purchase price for both the laptop and the tablet up to $2,500 for each item.  

 

It is important to note that you can only deduct the portion of your equipment that is used for business purposes.  For example, if you use the laptop for business purposes 60% of the time and the remaining 40% for personal purposes, you are only able to deduct 60% of the cost of the laptop for a business expense.  If, however, you are using the laptop exclusively for business purposes, then you can deduct 100% of the cost of the laptop.   

 

The following is an article about taking business tax deductions that you might find helpful:  https://turbotax.intuit.com/tax-tips/small-business-taxes/taking-business-tax-deductions/L5RueYPVS

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

Small Business technology purchase

@ToddZ1 thank you for the info. I for sure see this as a small business and have put it in Schedule C as a sole proprietor since I made about 10k in sales last year. All the info is great, I do the % break for my cell phone and my internet at home. I'm planning on getting at least a tablet this year which is way under $2500. 

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