Supplies vs Other Misc Expenses?

[taxes4739]

It seems like I'm always struggling over whether to put small expenses under "Supplies" or "Other Misc. Expenses."  TurboTax's instructions say "Supply expenses are incidental items that cost $200 or less or last less than a year" - which to me makes it sound like supplies can be virtually anything (except inventory or items over $200).  Thus are "supplies" really "all miscellaneous items under $200," and "other misc" is really "other misc over $200?"

Note: I'm a sole proprietor, and do not have a separate office space.

Some specific examples: where would each of these most appropriately go?

• chargers/AC adapters
• wires
• tools (< $200)
• cases/containers (i.e. for a laptop/phone)
• headphones (< $50 for use only while working)
• postage

The official IRS instructions for this line says "...the cost of books, professional instruments, equipment, etc., if you normally use them within a year." Many of these smaller items I listed are not used completely within a year...but then, neither are many of TurboTax's examples (i.e. flash drives, calculators, storage and filing boxes) - which seems to contradict the IRS's instructions. I can't seem to find where the $200 threshold mentioned in TurboTax comes from.

[PaulaM · Accepted solution]

TurboTax's suggestion that supplies are usually less than $200 and last less than a year is just a guideline. There isn't a hard fast rule because each business is unique. A $500 item may be a supply for one business and an asset in another. 

In general, after $200 and a useful life greater than one year, items begin to move into the asset section and can't be expensed in one year (they are depreciated). Even the example given in TurboTax 'reference books and guides' clearly can last more than a year. In addition, some professional books/guides can cost much more than $200.

As for miscellaneous items, this category exists for all other expenses that don't fit into one of the categories listed and are not assets. This can be anything.

You did not indicate your business above, but looking at your list you could put:

postage: office expense

cases/headphones: Misc

chargers/AC adapters, wires, tools: Supplies or Misc.

[taxes4739]

My business is software development (but software that runs on specialized hardware/equipment).

Re: Postage=office expense, since I don't have a separate office space...doesn't this category need to be 0?  The instructions say that this is "related only to your office space..."

Re: "In general, after $200 and a useful life greater than one year, items begin to move into the asset section and can't be expensed in one year (they are depreciated)." - I typically take the De Minimis Safe Harbor election, to be able to expense items up to $2500.

Re: "A $500 item may be a supply for one business and an asset in another," I guess that's really the crux of my question: how do you define what a "supply" actually is?  What kind of item might be a supply for one business but not a supply for another?

Why would you say that i.e. tools would be a supply, but cases & headphones wouldn't?

[PaulaM]

- You don't have to have an office space to put typical offices expenses such as stamps in the category.
- Again, this is just a guideline. Some business owners will elect Safe Harbor and expense items over $200 but < $2500, and other depreciate their items. Its up to the owner.
- No particular reason for choosing tools as a supply. They can be either. The same for the cases/headphones.

It's really okay to divide in any manner that you choose. No solution is more right than the other.

[taxes4739]

>>No particular reason for choosing tools as a supply. They can be either. The same for the cases/headphones. It's really okay to divide in any manner that you choose. No solution is more right than the other.

I guess my confusion is just that these 2 categories almost seem redundant - supplies is so non-specific that it essentially seems like they both just mean "misc, doesn't fit in another category." The other categories are perfectly clear: an insurance payment is insurance, a plane ticket is travel, an electric bill is a utility, a repair bill is a repair.  But a "supply" can be virtually anything cheap-ish & physical...which is why I was confused as to what this category is actually asking for, how it isn't just the same thing as "misc." Which is why I was trying to come up with a rule/definition, rather than just randomly putting the small physical stuff between supplies & misc.

(i.e. my idea of "'supplies' really means 'all miscellaneous items under $200,' and 'misc' really means 'all miscellaneous items over $200'")