Answers · Deductions, assets & depreciation
Can a Business Deduct Equipment Purchases?
Long-lived equipment is generally capitalized, then recovered through depreciation/expensing provisions or eligible safe harbors.
How it works
The rule, and what it turns on.
Invoices, cost, placed-in-service date, financing and business use should be retained.
Example
$40,000 diagnostic machine is recorded as equipment; the tax preparer then applies MACRS/§179/bonus as appropriate.
Common mistakes
What we see go wrong, and what we do instead.
- Posting equipment to supplies.
A better approach
- Use fixed-asset capitalization policy and schedule.
Authority
Where this comes from, so you can check it.
IRC §§263(a), 263A and 168; Treas. Reg. §§1.263(a)-1 through -3; IRS Publication 946. IRC §§167, 168 and 179; Treas. Reg. §1.167(a)-1; IRS Publication 946; Form 4562 and instructions.
Educational information, not individualized tax advice. Treatment depends on your facts, entity classification and tax year, and IRS instructions change. Confirm your own position with us before relying on it. Mint Associates does not provide legal services.
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