That expensive computer you just bought could be tax deductible. It all depends on how you use it.
Here’s how to deduct computers on your taxes.
Can students deduct the cost of a computer?
You get no deduction for a computer you use to help you with your school work. Sorry. The same goes for books and other school supplies. Just one more reason being a student sucks.
Can an employee deduct a computer?
No, tax reform changed the rules around unreimbursed employee expenses.
You’ll be better if you can get your employer to reimburse you for the cost of a computer. The employer will then be able to deduct the cost as a business expense. You don’t have to include the reimbursement as employee income because you’re using it for work.
Can I deduct a computer for my business?
Yes, the self-employed can deduct the cost of a business computer. The same goes for any other business equipment you buy.
How to deduct the cost of a computer
There are several ways to deduct the cost of a computer. Usually, you can deduct the entire depreciable cost in a single year instead of depreciating it over five years.
Can you deduct the entire cost of a computer?
Yes, you can use de minimis safe harbor to deduct the cost of a computer under $2,500. If it’s more, you may have to use the Section 179 deduction.
When do you have to depreciate the cost of a computer?
If you can’t use the de minimis safe harbor to deduct the cost of a computer in a single year, you’ll likely be able to deduct the deduct the entire cost under a provision of the tax law called Section 179.
Under Section 179, you can deduct in a single year the cost of tangible personal property (new or used) that you buy for your business. This includes computers, business equipment, machinery and office furniture. To take advantage of Section 179, you must use the computer in your business more than 50 percent of the time.
Listed property no longer
If you use the computer for both business and personal purposes (such as playing computer games), it no longer qualifies as “listed property” as per the Tax Cuts and Jobs Act effective 2018. Listed property typically includes items used for both personal and business purposes, such as cameras, printers, and computers.
The IRS had rigorous recordkeeping rules for these types of items to ensure they were strictly used for business purposes. Effective 2018, there are no recordkeeping requirements for any business use of computers.
First-year bonus depreciation allowed
To qualify for first-year bonus depreciation, property classified as listed property under the tax code must be used over 50 percent of the time for business. Because computers will no longer be classified as listed property (see above), you can use bonus depreciation to deduct computers used less than half the time for business starting in 2018. Bonus depreciation allows you to deduct a substantial amount of the cost of an item used for business in the first year that you purchase it.