Tax Deductions 9
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
What do I have to do to prove the business use of a computer, car phone or similar equipment?
To prove the business use of equipment, you must keep a log of usage if you use the equipment partially for business and partially for personal use. For computer and other office equipment you would need a log showing when each thing was used, the amount of time it was used, and the purpose of the business use. For automobiles you would need to keep track of the date of each use, the business purpose: the mileage for each trip and the total car mileage for the year. (See Table 24.1.) You also need to keep track of business and personal use of the Internet if you want to deduct the costs of your Internet service provider and/ or the online service you use to reach the web.
Can I deduct any equipment expenses if I don't use the equipment more than 50 percent of the time for business?
You could depreciate the business portion using the IRS tables for straight-line depreciation
Can I use the Section 179 deduction to offset income from my day job if my business shows a loss?
Under the rules that were in effect at the time this book was written, you can use the 179 expense deduction to offset other earned income such as wage employment, earnings from rentals, royalty income, and farm income.
What's the difference between a business asset and a business expense
A business asset is something you buy or acquire or develop that has or is expected to have monetary value and will use in your business for more than one year. Examples of assets are land, equipment, patents, buildings, and franchise rights. For tax purposes, a business expense is money a business pays out for products or services that will be used within the current year.
Are they treated differently for tax purposes?
Yes. The cost of business expenses is immediately deductible from income. The cost of an asset has to be spread out and deducted over a period of years or be added to the value of the asset and not be deducted at all.
How are amortization and depreciation different?
Amortization means spreading out the cost of an intangible asset, such patent or goodwill; depreciation refers to spreading out the cost of tangible business property (things you can see or touch), such as machinery, buildings, etc. Generally, expenses that have to be amortized may have to be spread out over a longer time period of time than expenses you can depreciate.
How do I know whether to consider a purchase a deductible expense or to depreciate it?
Generally, equipment or anything else you buy that has a useful life of more than a year has to be depreciated. Cost of things like bank fees, legal fees, advertising costs, office supplies and postage, and other costs that are incurred repeatedly would be expenses that are deductible in the year they were incurred for cash-basis taxpayers.
How do you know what the useful life is?
The IRS publishes tables showing the allowable useful life of various classifications of business assets. You'll find these lists in IRS Publication 946, Depreciation. You can download that from the IRS website at: http://www.irs.gov/pub/irs-pdf/p946.pdf
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | |
