From desktops to tablets, computers and web-enabled devices of all types make up a major part of our personal and professional lives every single day. So this begs the question: does the cost of a new computer qualify as an IRS tax deduction? Small business advisor Bert Seither explains:
It’s always nice to get a simple “yay” or “nay” answer to an IRS tax question to make the tax-filing process as simple as possible. In the case of deducting computer costs, however, there is some gray area when answering this question. Generally speaking, buying a computer is viewed as a personal expense in the eyes of the IRS. This means such a personal purchase would not qualify as a deduction on your taxes. Fortunately, there are some exceptions to this rule. If you buy a computer and use it more than half the time conducting business-related activities, the cost of the computer would qualify as a tax deduction. If you strictly use the machine for personal reasons, such as for playing games, downloading movies, or uploading photo albums to Facebook all night, its cost would not qualify for the deduction. This means purchasing a computer should fall under the business expense category for the IRS to let you claim it as a write-off, even if you use it in a home office instead of a traditional office setting.
Any hardware, software, or other electronic items may also qualify as a tax deduction. As mentioned earlier, they would have to be classified as business-related expenses. These kinds of items could include bookkeeping software, web design software to create a business website, or a Bluetooth microphone that you use to conduct online presentations for your clients. The increase in the various electronic and computer-related items has been tremendous over time, so just make sure whatever an item is at-hand is used most of the time for business reasons to claim it on your return.
In addition to being categorized under the business expense umbrella, Bert Seither also points out that technological costs may qualify as an IRS write-off for educational reasons. Computers are a big part of the education world and are used by students of all ages. If you purchase a computer and use it for educational purposes, it may qualify as an itemized tax deduction if it’s not already covered by an education-related tax break, like the American Opportunity Tax Credit.
Although the prices of all types of computers have come down considerably in recent years, purchasing one of these high-powered machines can still take a big bite out of any budget, especially if you’re a financially-strapped small business owner. This is why you should take full advantage of deducting this cost if you use a computer for work or education reasons. Bert Seither recommends looking into all business tax deductions to ensure you keep more of the hard-earned money you make in your business bank account instead of in Uncle Sam’s hands.