If I buy a laptop, can I write it off as a business expense so I don't get taxed on it?
I heard that something like this is classed as Capital Expenditure (something I don't have a clue about).
If you use it primarily for business, yes. Well, I think so. I write mine off. I use it for work primarily and I will take it with me when I meet with clients for presentations.
Use a business credit card and make your business expenses seperate. If it is for business purposes buy with that card, so you won't confused when filing taxes
If you do this, does it technically make it illegal to use the laptop for personal use?
If you can prove you use it for your business, then it is a business expense. Buying it with a corporate credit card - which every business person should have - was a great suggestion.
Of course, always consult with your tax consultant or CPA on this, which is another valid business expense!
no, you can still use it for personal use. I imagine it would be like having a home office. Say you work out of your office 8-5, you still get to use it for personal reasons after then.
A tax accountant will be able to tell you whether you need to depreciate a laptop or write it off.
One thing to also keep in mind is keeping your expense records seperate also.
Save every receipt.
I Keep an envelope in my purse/backpack just for that purpose. I also print out all online purchase receipts and keep them in a folder on my desk. A couple of my friends have been audited and it is a nightmare if you don't have records for validation.
I've learned from their IRS experience and have changed my haphazard ways.
I am now a believer in the priceless value of a receipt! Weekly, I visit my Sacred Drawer of the Business File Cabinet and happily tithe my every business related ticket and receipt. I truely believe in...
SALVATION THROUGH DOCUMENTATION!
This won't keep me from getting audited, but it will have them swimming in paperwork instead of me!
The advice I can give you is based on Australian tax law but hopefully you can take something of value from it. Also hopefully I wont give you to much information so as to confuse you
Firstly yes the purchase of a laptop is a valid business expense. But you can't claim the whole cost of the laptop in the financial year it was purchased. You will have to determine the "useful life" of the laptop which is usually around 2 1/2 - 3 years. Once you have the useful life of the laptop you then divide the cost of the laptop (which includes things like delivery and operating system as this is part of the acquisition of the asset and allows you to use it) by its useful life and that gives you how much you can claim per year over the life of the asset. This is what is meant by capital expenditure i.e. the purchase of an asset or in economics terms capital equipment.
To complicate matters if you purchased the laptop say half way through the financial year you need to pro-rata the depreciation you can claim in the first year. This means you take the per year figure you calculated above and times it by (months left in the financial year at purchase date divided by 12) which will give you the amount you can claim in the first year. The effect this will have is - say you decided the useful life was 3 years and you purchased the laptop during the financial year you will actually claim depreciation for the laptop over 4 tax returns.
I could complicate this more but before I do - Was the laptop purchased with your own personal money? Do you work through a partnership or company or some other entity other than as a sole trader?
Hope that helps.
In the UK it's a capital expense - you add it to your 'pool' of similar items (furniture, marchinery etc) which each year you can claim (usually) 25% of the entire pool towards expenses. You then subtract this 25% from the entire pool amount and the next year can claim 25% of the remainder.
So if your pool is £10,000 you can claim £2500 towards expenses. The next year you can claim 25% of £7500 (plus any extra capital expenses you experienced that year).
So the diminishing value method is the standard in the UK? Or do you have a choice between that and straight line?
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