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I'm a sole proprietor / contract employee (developer) in Texas (United States) and am planning to make a new hardware purchase. I remember being told that purchases made in the last quarter of the year can't be deducted entirely in that tax year; instead, they have to be depreciated over their expected life span (5 years for computing hardware). Is this true? Is there any way around this requirement?

I would prefer to deduct it entirely within one year, just to simplify my accounting, and because my business isn't guaranteed to continue as-is for the next year, much less for five. Am I missing a reason that depreciation would be better?

  • It would help if you'd mention what country's tax law you're referring to. – littleadv Oct 29 '14 at 6:41
  • Sorry, edited for that info. – eirikir Oct 29 '14 at 8:32
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I remember being told that purchases made in the last quarter of the year can't be deducted entirely in that tax year; instead, they have to be depreciated over their expected life span (5 years for computing hardware). Is this true?

It is true. In fact - it doesn't matter which quarter you made the purchase in. Computing hardware has to be depreciated. Whether it would be better or not is irrelevant.

Is there any way around this requirement?

Some purchases may qualify for Sec. 179 treatment. You'll have to talk to your licensed tax adviser about it (EA/CPA licensed in your State).

Note that State rules may differ from Federal, and you may be able to use Sec. 179 for Federal taxes, but may have to continue depreciating for State taxes.

  • Could you elaborate on Sec. 179? I knew there was a way to deduct all at once, but didn't know what it was called. I'm currently based in Texas, so I have no state income tax; I'm only dealing with USA federal income taxes. – eirikir Oct 29 '14 at 20:01
  • @eirikir irs.gov/publications/p946/ch02.html – littleadv Oct 29 '14 at 23:17

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