Figuring out how to deduct computer expenses on your taxes can be tricky. There are a few different ways to deduct, as well as different forms you can use to deduct, depending on whether you're an employee or an independent contractor. This article will provide some guidance so that computer expenses are deducted correctly, allowing you to get a bigger income tax refund, or at the very least, reducing the amount you owe the IRS.
- Make sure you deduct computer expenses in the correct place on your tax return. If you're an employee of the company you work for, computer expenses will be deducted in your itemized deductions. If you're an independent contractor, they'll be deducted on Form 4562.
- Make sure you also deduct anything computer-related. In other words, if you buy a new printer that you use regularly in your work, the printer, as well as the paper and ink cartridges that you use, can also be deducted. In addition, if you make any other upgrades, such as upgrading your hard drive or graphics card, these can also be deducted. The most important thing is to make sure you save receipts for anything you deduct, so your bases are covered in the event the IRS ever decides to do a random audit.
- Be aware of the listed property limitations that the IRS imposes. According to Fool.com, listed property limitations apply unless you qualify for the office at home rule. These rules mean that you can take an accelerated depreciation over five tax years if the computer is used more than 50% for business reasons, or you can take a special code section election (section 179) to expense the cost of the computer all in one tax year (the year the computer is purchased and placed into service). If you use the computer less than 50% for business, you're required to take a straight-line depreciation, and you completely lose the expensing election under Code Section 179. In addition, your computer expenses will be treated as a miscellaneous itemized deduction and be required to be reported under Schedule A.
If you follow these tips, you will deduct computer expenses correctly, and as a result save yourself money on your income tax return.