Can I Claim A Deduction for my Computer?
If you buy a computer that you use in your trade or business, you can generally depreciate or expense the costs connected with that use. Like any business equipment, the computer is capitalized and depreciated on Form 4562, although you may be able to use Sec. 179 (explained on that form) to write off the cost in full in the year of the sale.
You include in the cost of the computer any hardware or software bought with the computer. Supplies you buy on an ongoing basis are expenses for the year bought. The cost of an upgrade is generally subject to depreciation as a new business asset.
If you buy software separate from the computer, the write off depends on whether the usage of the software is likely to be for more than a year. Limited use software, such as calendar programs and tax preparation software, can be expensed as bought. However, software with a life over one year is depreciated (straight line) over a period of three years, using Form 4562.
If you use your computer at your home, and your home does NOT qualify for the office-in-home deduction, you are required to keep a written hourly log to apportion the usage between business, investment and personal uses. Only the business usage can be deducted on Schedule C. For further information, see IRS Publication 587.
