Writing Off Business Expenses

Fiver

Fiver

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Jan 30, 2009
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My accountant tells me that since I have my own biz, I can write off 100% of all business expenses.

This includes something like buying a brand new $2000 computer which I use for business.

Is this what other people are hearing from their accountants? Can you really get back the $2000 on your next return?
 


you don't get back $2000, when you make a $2000 deduction, it means you don't pay the tax on that $2000
You reduce your adjusted gross income by the amount of your deductions.
 
medicalhumor said:
you don't get back $2000, when you make a $2000 deduction, it means you don't pay the tax on that $2000
You reduce your adjusted gross income by the amount of your deductions.
Click to expand...

So if I made $100,000 this year, I would deduct $2000 (price of computer) from that number and pay taxes on $98,000 instead of $100,000?
 
Equipment like computers are usually capital assets (good rule of thumb is it's cap if it's over a grand) which means you deduct a certain amount each year like 20%/yr over 5 years ... this varies ... but your accountant should know whether it's an expense or a capital asset
 
Fiver said:
So if I made $100,000 this year, I would deduct $2000 (price of computer) from that number and pay taxes on $98,000 instead of $100,000?
Click to expand...

Bingo.

I just paid taxes (in Japan, not the US) and I deducted my newest computer, printer, internet connection, all my PPC expenses, domains, hosting, outsourced work, software, learning tools, etc.
 
Only a percentage of the cost get written off your taxes. $2000 wouldn't be taken off, but a % of that $2000 would...



Correct me if I'm wrong...
 
snavr said:
Equipment like computers are usually capital assets (good rule of thumb is it's cap if it's over a grand) which means you deduct a certain amount each year like 20%/yr over 5 years ... this varies ... but your accountant should know whether it's an expense or a capital asset
Click to expand...

You can still take a special Section 179 deduction on assets that normally have to be depreciated and write it off in a single year

There are limitations though like you can't do for it land or real estate and you are limited to total of a quarter million a year. But for computers and software it normally isn't a problem.
 
snavr said:
Equipment like computers are usually capital assets (good rule of thumb is it's cap if it's over a grand) which means you deduct a certain amount each year like 20%/yr over 5 years ... this varies ... but your accountant should know whether it's an expense or a capital asset
Click to expand...

Buy a new one every year.
 
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