Tax Year Prior to 2020: Where do I deduct a new computer as self-employed in TurboTax?

[acn28]

I see that deductions can be made in both the business expense section and under 'personal' in job-related expenses. I initially put it under business expenses, but that made my audit risk high because it exceeded my income for this year for that business. But I use the computer for my work. 

When I classified it as a job-related expense in 'Personal', my audit risk was low, but it did not reduce my federal taxes owed. 

What is the correct way to classify this expense? I am unable to find an answer for this question. 

If the correct classification is in Business Expenses, I'm concerned that the audit risk is so high. Either way, I want to classify it correctly. Thank you!

[KarenL2]

The proper way to enter it is the Business Expenses as an Asset, if it is used for your self-employment income.  The job-related deductions are only for expenses related to W-2 income as an employee, and it is unlikely you would even get a tax benefit from it.   

The fact that your business is at a loss due to the deduction is perfectly fine. Many businesses have losses the first couple of years.  However, if you consistently run at a loss for several years, then the IRS may decide that you do not have a profit intention and convert you to a hobby.  

Your business loss will be netted against the other income on your tax return. 

How to get to that area :   While inside the software and working on your return, type Schedule C in the Search at the top of the screen (you may see a magnifying glass there).  There will be a popup that says Jump to Schedule C.  Select that to get to the general area. 

• Business Income and Expenses
• select Edit next to your business (if it is there)
• scroll to Business Assets

If you want to reduce the amount of current deduction (and reduce your business loss), then do not elect any accelerated depreciation or Section 179 expense deduction.  This will allow a smaller deduction for 2015, and additional deductions for the following years (until the cost basis is used).

[acn28]

Thank you!

[KarenL2]

You're welcome!

[deme]

If you purchase a computer for your business that is less than $1,000, can I expense the entire amount in 1 year as an expense since it is under the Federal Guidelines? If so, where would I expenses it...under office supplies? 

[Cynthiad66]

Employees: The cost of a work computer is no longer deductible in tax years 2018 through 2025 due to the Tax Cuts and Jobs Act (TCJA) that Congress signed into law on December 22, 2017.

Prior to the tax law change, employees could deduct the depreciation on unreimbursed computers they purchased if the computer was required for their job and its use was for the employers' convenience. Work computers purchased for the convenience of the employee (including those that were purchased so the employee could work at home) didn't qualify for a deduction.

Self-Employed: If you use your computer to generate income or run your business, you can either write it off as a business expense under the business safe harbor election (up to $2,500) or treat it as a business asset. As a business asset, you have a choice between deducting depreciation for the next 5 years or the full cost in the year you acquired it (assuming it qualifies for Section 179 treatment).

Related Information:

• What can I expense or depreciate with the business safe harbor election?