You may have heard tax reform eliminated tax deductions for unreimbursed employee business expenses beginning with your 2018 taxes. If you own your own business, however, you can still deduct business expenses.
So what high-tech toys (oops, excuse me, necessary work-related devices) can you deduct? Here are the rules.
Cell phone: If you use your cell phone exclusively for business, then the cost of the phone equipment and the cost of the monthly service are both tax-deductible. If you use the phone partly for business, well – you can do the math. Use it 50% for business and 50% for personal, you can deduct half of the costs.
Computers, laptops, notebooks, tablets: Your business expenses must be necessary, customary, and reasonable, according to the IRS. That means that you have to have a business use for your computer or iPad.
If you work in the computer industry, this is a no-brainer. But if you are a hairdresser, your computer purchase would be necessary and directly related to your business if you needed it to order supplies, keep track of receipts and expenses, etc. If that use requires you to be connected to the internet, then the cost of connectivity will also be deductible, but if your kids use the same device to do their homework and play video games (or you do), then only the business portion of the costs will be deductible.
Internet usage: If you work while on airplanes or in hotels, and you pay for internet connectivity in the air or at the place of lodging, that cost is tax-deductible if it is related to business activities.
Software.: Here’s the bad news first: the latest gaming software doesn’t qualify for a deduction unless you are in the gaming industry and need it for work.
But, if you buy Quickbooks Self-Employed to keep track of your business income and expenses and TurboTax Self-Employed to prepare your self-employed tax return, those expenses will probably qualify. It is likely that the standard office suite programs for word processing and spreadsheets will as well. Of course, if the software has both business and personal usage, you may not be able to deduct the full cost.
Now or later? You can deduct the full amount of the gadget in the year it was acquired under IRC Sec. 179, or you can amortize it over a number of years (generally 5 – 7 years), deducting a fraction of the cost each year. Most people opt to deduct it all at once.
Under tax reform, you can deduct as much as your business’s net income or up to $1,160,000 – whichever is smaller – for qualified business equipment on your 2023 taxes. Examples of qualified business equipment are computers, computer software, office furniture, and equipment. Six-passenger SUVs more than 6,000 lbs but less than 14,000 lbs placed in service and used for business may qualify for up to a $28,900 deduction for tax year 2023.
Don’t worry about knowing about these tax deductions when you file. No matter what moves you made last year, TurboTax will make them count on your taxes. Whether you want to do your taxes yourself or have a TurboTax expert file for you, we’ll make sure you get every dollar you deserve and your biggest possible refund – guaranteed.
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