I've been freelancing for over a year now and use my desktop PC that I have owned for several years for everything I do business- and pleasure-wise. I work at home but was anticipating a small gig that would require me to travel so I bought a laptop in December 2022 for about $700. The gig I was expecting didn't pan out.
I could use some help understanding the following scenarios for tax purposes:
(1) Can I claim the laptop for business purposes even if it just sits there being unused? The purchase would not have happened for any other reason (I don't even like laptops).
(2) Let's say I get a gig or two (or even 100) during 2023, is there any reason I can't include this laptop as a business expense (assuming I only use it for business).
(3) I was planning on expensing the entire (100%) $700 on my 2022 taxes. Would I have had to use the computer in 2022?
(4) With regard to line (3), how many years would I have to use it for business purposes before I could use it for non-business purposes (considering the initial 100% claim)? Are there any statute of limitations?
1. You bought it for business, so it is an expense but it must meet the business-use requirement below.
2. You bought the laptop with the intention of using it and growing your business so as long as you use it more for business than personal, you are fine- just pro-rate it.
3. You can only elect the write off in the year of purchase and it must have been put into use. See Electing the 179 deduction.
4. You found the catch. If it is truly a business laptop and switches to partial personal use, then there could be a need for recapture of depreciation. A computer is a 5 year property.
Pub 946 has more information and states:
Business-use requirement. If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. You may also have to recapture (include in income) any excess depreciation claimed in previous years. A similar inclusion amount applies to certain leased property.
since it was not placed into service (business use ) in 2022 no deduction in 2022. in 2023 you would have to allocate the tax basis (the lower of your cost or Fair Market Value when placed into service) between deductible business use and personal use.
1. You bought it for business, so it is an expense but it must meet the business-use requirement below.
2. You bought the laptop with the intention of using it and growing your business so as long as you use it more for business than personal, you are fine- just pro-rate it.
3. You can only elect the write off in the year of purchase and it must have been put into use. See Electing the 179 deduction.
4. You found the catch. If it is truly a business laptop and switches to partial personal use, then there could be a need for recapture of depreciation. A computer is a 5 year property.
Pub 946 has more information and states:
Business-use requirement. If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. You may also have to recapture (include in income) any excess depreciation claimed in previous years. A similar inclusion amount applies to certain leased property.