Deducting Tools of Your Trade
You’ve bought the equipment you need for your business right? Perhaps you are still researching what types of tools you’re wanting to purchase. It seems there is always more equipment you are needing to buy to keep the business operating like a streamline butterfly. Why don’t we take a look at the advantages of deducting tools can be for you and your business.
Generally, all businesses need some type of tools in order to function. These can be construction tools to your computers and printers. The IRS lets you deduct equipment that you are required to use for the purpose of your business.
Two methods to deduct
Normally you will get to write off a percentage of the actual cost each year over a specified period. This is what we call depreciation and the IRS has rules for the different types of tools and equipment you depreciate.
If you buy a computer that you are going to be using for your business, you can deduct the cost over a period of time. If the computer cost you $1,000 according to the IRS, if you are deducting the cost, you must do it over a 5 year period. Therefore you can deduct $200 a year for the next 5 years.
One of the greatest depreciation options the IRS allows is the 179 deduction. This allows you to write off 100% of the equipment in the same year that it was purchased. There are limits to this deduction that the IRS have set.
So same example with the computer, if you buy it for $1,000 by taking this approach you can write off the entire amount the year you bought it. Meaning you get your cash savings much earlier.
Keep in mind if you are buying or already have bought a significant amount of equipment for your business this year, you will want to discuss the best option and strategy with your competent accountant.
Deducting Tools Feels Right
Whichever method that you and your accountant decide works best in your specific situation, then based on those methods’s rules feel free to purchase the equpment that you are needing to help keep your business running properly.