How to Expense Different Items

NikonsandVstroms

I know this is something to talk to an accountant about and I'm hoping to be able to set up a meeting with one soon but does anyone know of a good resource to check out that gives examples related to this field (like cameras, software, studio lights and equipment, monitors/computer upgrades) and if the dollar amount of these purchases factors into the years they are deducted over. I know this is the start of the busy season for them so it might be hard to see one soon so I'd like to at least have a general idea of how it works.

Until now I've been able to do pretty much all my jobs with the equipment that I already owned but technology is finally moving on.

ian408

You should be able to find a book on accounting principles. What you're looking for is asset types and how to treat them. Specifically, asset depreciation.

Keep in mind your accountant will be able to give you the best advice with regard to depreciation as it relates to the gear you're interested in acquiring. In the past, companies I've worked for have depreciated computer equipment over a three year period. But you need to be careful because when the asset reaches it's end of life-so chose the asset life carefully.

mike_k

ian408 wrote: »

But you need to be careful because when the asset reaches it's end of life-so chose the asset life carefully.

I'm not sure what this means...?

For cameras and photo equipment you're probably looking at a six year asset life. Four years for computers and computer related equipment.

You probably will also have the option to deduct the entire amount of your capital purchases in the year you made the purchase, if you so choose. Look into Section 179 depreciation. This makes the bookkeeping easier, and is a good option if you have a profitable year.

ian408

Six years is too long for cameras and computers. Three is better since technology changes so quickly. Five at the longest.

The caution for EOL is to be sure you're properly depreciating the asset and that at the end-of-life, you don't continue depreciating it.

NikonsandVstroms

mike_k wrote: »

I'm not sure what this means...?

For cameras and photo equipment you're probably looking at a six year asset life. Four years for computers and computer related equipment.

You probably will also have the option to deduct the entire amount of your capital purchases in the year you made the purchase, if you so choose. Look into Section 179 depreciation. This makes the bookkeeping easier, and is a good option if you have a profitable year.

This is what I needed thanks.

mike_k

ian408 wrote: »

Six years is too long for cameras and computers. Three is better since technology changes so quickly. Five at the longest.

You don't get to just pick the number of years that you want to use. This is a quick overview of the depreciation rules. The depreciable life of an asset is dependent on its class. I'm not sure what table I was looking at in my first post, the years I listed are not correct. This is a better reference - and it will also tell you everything you never wanted to know about depreciation. Table B-1 towards the end has a list of the asset classes.

It's not entirely clear which class cameras fall into, I think you could argue 5 or 7 years. Not 3.

Also - NikonsandVstroms - make sure you understand the rules around personal use of any of your equipment. It could change the way the depreciation is handled.

Again, it's easiest to go section 179 and take it all in the first year.