Deducting computer costs - simple way?

[FEDUKE404]

I'm certainly aware of the rules for listed property, Sect 179, et al, but I'm just curious how those of you in a similar situation have/would have handled this scenario:

I purchased a desktop computer system for just over $1k. During tax season, for Sch C purposes most of the use is legitimately for business. During off-season, business use decreases significantly but certainly is present (extensions/amended/"problems"/etc.).

I would simply rather forego any deduction than to keep a detailed log of all my computer use, and of course there are those "gray zones" (is this post a business use??) but OTOH it seems unfair not to be able to legitimately claim something! It is likely I would be content claiming 25% of the cost, knowing that in reality the "real" business use might be greater. Something like a "safe" number that is realistic. I would also use a similar number for associated costs, such as firewall software but not the "annual" tax software.

So, what have you done in a similar scenario? Suggestions?

Now that computers are so inexpensive, unlike the $3k+ monsters of days gone by, it's almost not worth the effort to take a per cent of a per cent of a small number. Just expense something and let it go!

And finally, how would you view things for a second lap top computer available for client visits etc?

Well, just something to break the almost-summer monotony......

Thanks for your perspectives and experiences.

FE

[erchess]

Personally

I deduct the cost of the software I have that is only marketed to tax professionals. I set it up for depreciation and then take a 179 election to expense. I think if I were too big to take the 179 I might based on another thread here just take it as an expense on the grounds that its useful life is pretty much limited to one year and for the research letter writing and other tools it is absolutely limited to one year. For example, if I write a letter for a prior year return I will use the current year version of the relevant CFS Tool. The only other software I have that I might not have if I were not in the tax business is Microsoft Office. It is in the same boat as my computer. I don't try to claim a deduction for either because I make too much personal use and I don't want to argue with the IRS about it.

If I had the money to own two computers then I would probably use one business only and the other personal except for possibly backing up key business data like the returns and other client files.

[Lion]

Office vs. Personal

I used to take a percentage of computer use. But, prices have dropped so much that I bought my hubby a new computer when I bought a new office computer. So, we have the family computer with the games and personal e-mail and photos and his school work (teacher/employee), and I have my home office computer with my tax program and Excel and QB and message boards, etc. It was worth it to keep him happy and to keep our visiting kids off my "tax" computer with client info and to not worry about keeping a log! Hubby thought it was a gift for him, but it's a gift for me.

[MAMalody]

<<<Hubby thought it was a gift for him, but it's a gift for me.>>>

I'm going to send him a link to this thread. All this time he thought your were trying to be sensitive to his needs. :>)

Mike


I don't even bother to write off my computer. Too much of a pain to keep a log. I do expense the software that is used exclusively for business purposes, however.

[Byron]

Pick a reasonable percent and move on

I write off my main home office computer, but not the other two (a bit of personal use on the business machine is more than offset by backup and business use on the others).

No log -- can't bill the hours it would take.

No arguing with the IRS -- if they don't like my number, I'll agree to their number (the dollars involved aren't worth my time).

Pick a reasonable percent and move on.

[DaveO]

I'll echo what Bryon said

"Pick a reasonable percent and move on."

Rarely do I put a client computer or a cell phone on at 100%, there is always personal use. I have also never had an auditor argue with an allocation. Once they see a good faith effort to allow for personal use they have just moved on.

[veritas]

Curious

I use my office land line for personal use all the time.

Should I be limiting part of my phone expense?

Should the auditor that uses an IRS office phone for personal use reimburse the government?

[Gretel]

Don't

bring bad ideas to the public.

This thought has crossed my mind frequently, and I am sure glad that having a separate office space eliminates some problems. On the other hand it also makes it less worthwhile to move to an home office, since quite some deductions will be eliminated then or much more difficult to prove.

If you start at personal phone calls, how about personal coffee and, thereafter, maybe some toilet paper.

[erchess]

I have a phone in my home office

but the only listing for it in the directory put out by my phone company is for me as a person so I can't deduct any of the costs. Verizon serves my home and the clients I want to serve for the most part live in a nearby town where the phone service is from ATT/Bellsouth. Also Verizon would charge me an arm and a leg more for the second line if it had a business listing. So I have a yellow pages ad in that directory. I also always answer that phone "Thank you for calling 1040 ON Wheels Name here how can I help you?" but my social contacts cut me off at Thank You and tell me who they are and what they want. I get almost none of my personal calls on the home line which is nice because it is free for the rest of the family..

By the way if anyone thinks from these facts that I could deduct some of my phone expenses, post here or send me a PM or email from the site.

[Nashville]

Alternate Determination

...instead of using a log. (I agree very of us would justify using a log to support a few hundred dollars of depreciable expense).

1. On December 31, list all ACTIVE software and what you paid for it. Separate into three categories: a)software purchased for business b)software purchased for the computer operation itself c)software purchased for non-business. Then eliminate b) and determine % of business software. Apply that to computer usage. Example: a)is $4500, including three years tax software, Microsoft Office. b)is $800 including spamfilters, McAfee firewall, and Norton DiskDoctor. c)is $1500 for TravelGuide, and Kids Games.
Total is $6800. Relevant total is $6000, of $4500 is business-related. $4500/$6000 yields 75% supporting business.

2. Go through e-mail for last 6 months, eliminate spam. Compute how many e-mails are business-related and how many are personal. Personal e-mails have declined in last few years as the Fad of Instant Messenger and e-mailing friends around the world has been squeezed out by business messages that you now have to spend your time addressing.

[DonPriebe]

Or try this ...

For my desktop I keep two partial logs during the year - one in February (representative of tax season) and one in September (representative of off-season). A weighted average between the two gives me a credible annual percentage usage. It always turns out to be below 50%, so it's listed property under ADS.

My laptop (used almost exclusively for client visits) was 179'd the first year. I keep an actual log on that one to make sure business usage doesn't fall below 50%.

[JohnH]

I'm a little surprised by this. I had no idea that people actually keep logs of their business vs personal computer use.

I have 3 computers arrayed around my desk, and as far as I'm concerned they are all business computers from the minute I turn them on each morning until I shut them off each night. Time I spend sending personal emails, reading the news at work, or paying personal bill online is just a normal part of the workday. Same for my travel laptop.

If IRS wants to know about my personal usage, I'll show them the computer in my study at home.

[erchess]

I could be wrong

but I don't think the IRS's actual attitude toward computers quite matches the Code. I think that Laptops are viewed as having a lot of personal use unless you really want to prove otherwise by examination. I think that for a desktop computer it matters very much where you have it. If it is in an office in the home, I think it might as well be a Laptop. If it is in a detached structure home office I think they are a little more willing to take your word it is all or mostly business use. I think if it is in a regular office away from home they will assume it is all business use unless they are convinced in their hearts that you are cheating and they just haven't been able to prove it.