2

I am running my own business via LLC and was considering to buy a laptop for that business. At some point the CPA I consulted with mentioned that I should be expensing equipment purchases under $2500 in the same year, and everything above - depreciate it over several years.

But now I found about Section 179 which seemingly allows to depreciate equipment in the same year up to $500k...

Am I missing something, or it is as simple as filing form 4835 in the next year and put whole cost of the laptop into it?

  • How do you spend more than $2500 on a laptop these days? IIRC (it's been a few years since I bought a new one) I just put mine - about $1000 - under "office expense" on Schedule C. But I'm a sole prop, not LLC. – jamesqf Oct 5 '16 at 4:43
  • 2
    Why do you think it would be better for you to depreciate the laptop over time versus expensing the entire amount? – quid Nov 3 '16 at 23:47
1

The CPA's mention of $2,500 is probably referring to the recently increased de minimis safe harbor under the final tangible property regulations (used to be $500) without an applicable financial statement. The IRS will not challenge your choice of expense or capitalization on amounts on or below $2500 if you elect the de minimis safe harbor election on your return. However, you must follow whatever you're doing for your books. (So if you are capitalizing your laptops for book purposes, you would also need to capitalize for tax purposes).

Section 179 allows you to expense property that you would have otherwise have had to capitalize and depreciate. Section 179 can be annoying, especially if your LLC is treated as a passthrough, because there are recapture provisions when you dispose of the asset too early. For the tax return preparer, it makes the return preparation much more simple if there are no fixed assets to account for in the first place, which is quite possible if you are expensive all items/invoices less than $2,500.

0

I'm not a tax expert, but I think you mean Form 4562, right?

If you acquire the laptop in the year for which you're filing taxes, then it is just that simple. (At least according to my reading of 4562 instructions, and my history of accepted tax returns where I've done this for my own business.)

If, however, you acquired the laptop in a previous year and have already depreciated it previously (with the plan to spread over several years), there is more complexity I believe -- you may limited in how you could accelerate the remaining depreciation.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.