Laptop Computer Tax Deduction
Is there a laptop computer tax deduction? Do you have to be operating a business with you laptop in order to claim depreciation and related equipment costs? These are common tax questions about a laptop.
A laptop is a personal computer. It is certainly more portable and therefore lends itself more easily to many business purposes, but it is still a computer and therefore is subject to the same rules as a regular desk top personal computer. One advantage of a laptop is that it is much easier to convince the IRS that it is for business and not pleasure. What are the rules for claiming the laptop computer tax deduction?
First of all, let’s get the bad news over with. If your main purpose for your computer is to play games, send emails to your mother, or chat with your friends, there is no tax deduction that will apply. The only time a computer, laptop or otherwise, results in a tax deduction is when it has some income producing purpose. This business purpose must meet two conditions. First, it must be required by your employer as a condition of employment. Second, it must be used at the convenience of your employer.
When these conditions are met, the cost of the computer and related hardware can be taken as a tax deduction. If you use it for the employer’s convenience more than 50% of the time, you can use either an accelerated depreciation method spreading the cost over 5 years or make a Code Section 179 election and take the entire deduction in the year the equipment was purchased. If the use is less than 50%, you must use straight line depreciation and can not use Section 179. The deduction is a miscellaneous itemized deduction and subject to the 2% of Adjusted Gross Income reduction.
If you use the computer on your own for any income producing activity such as tracking online investments or even preparing tax reports, you can claim operating expenses and depreciation also. In this situation, only the percentage of use that goes to this activity is deductible. In other words, if you use your laptop for income producing purposes 40% of the time and 60% of the time you use it for purely personal enjoyment, the deductible amount is 40% of the operating expense and depreciation.
Of course, if you are using the Home Office method, the computer can be claimed as a business expense. This would include cost of new equipment and operating expense as well as other peripheral equipment like printers or scanners. It does not really matter if the laptop is disconnected and taken on a business trip as long as it is returned to the Home Office and is used there for a primary business purpose.