TAX SERVICES

CRYSTAL COMPUTER CONCEPTS

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DEPRECIATION

BUSINESS OR PERSONAL COMPUTER

Certain Business Property and Depreciation

Certain business property can be depreciated. The assetís cost is expended periodically over time. In general, property that is tangible, meaning physical, with a life longer than several years is deductible. Depreciable property is used in your trade or business. For example, a refrigerator that you buy for your house is personal and cannot be depreciated. However, if you are in the deli business, and you buy the refrigerator for your store, then its cost can be periodically deducted over time. Note here that the store refrigerator is dedicated 100% to the business.

If you have a home office and use an asset, such as a computer, for both personal and business use, than an allocation between the usages must be made. IRS allows only the business portion to be depreciated. IRS has a special section for dual purpose property. The section for this depreciation on the IRS form is Listed Property. (For more information see IRS Pub. 946, "How to Depreciate Property").

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Listed Property

Again, listed property refers to equipment that may be used for both personal and business purposes. Listed property includes:

  • passenger cars
  • SUVs or trucks used
  • property generally used for purpose of entertainment, recreation, or amusement
  • any computer or peripheral equipment
  • cellular telephones or similar telecommunications devices
  • other property that may be specified by regulations.

Custom Bookkeeping:

  • CUSTOM DESIGN
  • TRAINING
  • SUPPORT
  • TAX UPDATES
  • ANNUAL TAX PREPARATION
  • COMPLEMENTARY E-FILING

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Please, note here that popular equipment like computers and cell phones are listed property. This necessitates the allocation between personal and business use.

Record Requirements

The IRS can, as it has been upheld by the courts, deny the tax deduction for listed property unless you maintain adequate records. According to Publication 946, the taxpayer must maintain certain records. This certainly implies at the least that you have a record keeping system in place. Records expected to be maintained are account book, diary, and log, statement of expense, trip sheet or similar record with documentary evidence. Both your receipts and documentary evidence through your record keeping system must be sufficient in the eyes of the IRS to establish each element of an expenditure or use. Without this documentation support your depreciation deductions can be denied.

Business Use

For your cars, computers, and cell phones the IRS looks for usage documentation. In order to depreciate such property, the IRS requires the taxpayer to substantiate and document the business usage. Specifically, the tax pub lists elements of expenditure or use. This includes the investment or business purpose for using the asset. Thus, adequate documentation including book records is necessary to be in compliance with IRS requirements for mixed usage, listed, property.

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DELAWARE'S MIDDLETOWN ODESSA AND TOWNSEND AREA