Dear Lifehacker, When claiming anything over $300 as a tax-deductible expense, you’re generally supposed to ‘depreciate’ the asset over the its useful life rather than claiming the total purchase price up front. With a laptop I believe the depreciation period is three years. If I were to purchase a new laptop each year for work, and if I report the income from selling the old laptop each time I buy a new one, does that make it permissible to claim the full price of each new laptop each year? Or do I have to continue to ‘depreciate’ multiple assets simultaneously despite previous years’ laptops no longer being used? Thanks, Laptop Lover
Laptop picture from Shutterstock
Indirectly, your question proves the value of having a good accountant, since they can keep you up-to-date when taxation laws change. In this instance, the relevant change is that if you’re a small business with a total income of less than $2 million, you can write off any purchase valued at less than $6500 immediately in the year you incur it. (We noted this change, which applies to the 2012/2013 taxation year and subsequent periods, in our Tax Week guide earlier this year.)
In your situation, that potentially means you can immediately write off the value of your laptop, rather than having to depreciate it over a number of years. (I’m assuming, perhaps unfairly, that you’re not turning over $2 million a year.)
As you correctly note, if you sell the old machine, the income you earn from that does also need to be included on your return. That would also apply if you were depreciating the machine — once you’ve sold the asset, it’s no longer something you can claim against.
The important caveat here is that all this applies for small business operators. If you’re a salaried employee, you could (at best) only claim the proportion of the cost of your laptop that related to doing your own job, and that might be a hard claim to push if your workplace provides you with a laptop anyway. Again, for specific advice you’d need to talk to an accountant, but the rules relating to salary sacrifice for laptops have been tightened for employees in recent years.
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