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I have a small business. In FY2023, I (my small business) purchased an equipment on behalf of a client for which the client reimbursed me, therefore, the payment appears as income. The equipment is the client's possession. Can I deduct the cost of the equipment from my taxable income? I file in Michigan, USA.
Thank you!

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    therefore, the payment appears as income - appears where? Reimbursement is not income, it's ... reimbursement. Also, for tax questions please mention your jurisdiction, as laws vary.
    – littleadv
    Commented Apr 10 at 21:51
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    Report net income. Expenditure minus equal reimbursement yields zero net. If you sold it for more (perhaps you bought it wholesale and sold it retail with a markup), the profit is income.
    – keshlam
    Commented Apr 10 at 23:54
  • What jurisdiction are you in? Tax rules vary around the world.
    – Vicky
    Commented Apr 11 at 13:08
  • Technically, you could report the purchase as a business expense and the sale to them (reimbursement) as a business income -- but only if you report both, so they cancel out. (I'm assuming US income tax; other regimes may vary but this seems pretty fundamental.)
    – keshlam
    Commented Apr 11 at 14:35
  • Hi keshlam, please answer questions with an Answer, not a Comment. You can copy and paste your text into an Answer.. thank you. Commented Apr 11 at 19:03

2 Answers 2

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Technically, you could report the purchase as a business expense and the sale to them (reimbursement) as a business income -- but only if you report both, so they cancel out. (I'm assuming US income tax; other regimes may vary but this seems pretty fundamental.)

What is taxable is net income. Expenditure minus equal reimbursement yields zero net. If you sold it for more (perhaps you bought it wholesale and sold it retail with a markup), the difference between the two -- the profit -- is income. If you sold it for less, for some reason (perhaps to help make the sale of other products and services), you could count that loss against your total income.

But you do have to count both sides. Standard balancing of the books.

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When you buy something for a client you should bill the client for the expense. The money you spent is a business expense, the money that comes in from the client is income, so this should come out to be net zero (unless the date of expense and the date of payment fall into different calendar years).

If you do proper book keeping, that should happen automatically. If not I strongly recommend talking to an accountant and your tax advisor.

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