How to Deduct Office Equipment and Furniture

How to Deduct Office Equipment and Furniture. When if comes to office equipment and furniture, there are several ways you can deduct the purchase costs as business expenses. Which way you choose may depend how much the equipment or furniture cost or what your financial situation is at the time.

Keep the receipts for all office equipment and furniture purchased over the taxable year. You will not have to produce these receipts to file your taxes, but they will be necessary to prove your claim should you be audited.

Determine whether the new office equipment or furniture you acquired is depreciable. Depreciable assets are defined as having a determinable life span exceeding one year and for which a value can be calculated.

Decide whether you want to take a Section 179 deduction. A Section 179 deduction allows you to take a full or partial deduction for the entire cost of the office equipment or furniture in lieu of deducting the depreciated portion. If the financial situation of your business is such that a significant deduction in income would provide needed financial relief, this is a good option.

Determine whether you want to take the deduction as a depreciable asset. The benefit of choosing to treat office furniture and equipment as a depreciable asset is that you can spread the deduction over many years. There are usually years in which a business purchases more of such assets than others, and it's nice to be able to count on taking a deduction in future years.

Use the MACRS Depreciation model (the most commonly used depreciation model for business property) to calculate the depreciation of the office furniture and equipment you intend to deduct from your income taxes. The IRS gives detailed instructions about how calculate the depreciation on property in its Publication 946 (see Resources below).

Use form 4562 to record section 179 deductions and what you deduct as depreciating property. This form is attached to your tax returns.

Tips

  • Most office equipment and furniture is classified as a five- or seven-year depreciation. Computers and other machinery used in an office usually depreciate in five years. Furniture and fixtures usually depreciate in seven years.

Warnings

  • Section 179 deductions are subject to a limit imposed each year. Look for these limits on Form 4562 "Depreciation and Amortization" from the IRS.

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