When you make big equipment purchases for your business (computers, cameras or lenses, audio equipment, musical instruments, etc.), tax rules allow us to either take the full expense in the year you bought the item or depreciate the expense, which means spread the cost out over a few years. Your tax preparer can help you decide which option is best in your tax appointment, but here are the basics of depreciation:

Almost everything we buy wears out or becomes obsolete over time. Because of this, the tax code allows the cost of certain kinds of business assets to be divided up and taken as a yearly deduction for a set number of years. This is called depreciation.

To be eligible for depreciation, the asset (or big equipment) must be:

• Owned, not leased or rented

• Used in a trade or business to produce income

• Have a useful life of more than 3 years

• Something that wears out or loses its value

There are many ways to calculate depreciation, and certain assets have to use different rules from others. We’re here to make sure you follow the right rules. When you make a big purchase, be sure to list it under “Big Equipment” in your expenses in the SELF EMPLOYMENT tab. When we have our tax appointment, we’ll talk through what makes the most sense for your situation. 

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