Tax Tips: Deducting Your Home Computer

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Yesterday I told you that computers and peripherals are “listed property” that require special recordkeeping and depreciation if used for business.

The IRS, in Publication 529, tells us that you can only deduct a computer as an employee if it is (a) for the convenience of your employer, and (b) required as a condition of your employment. You cannot deduct a computer if its business use is merely for your own convenience.

If you occasionally bring work home and use your home computer to write reports or do research you cannot claim a deduction. But if the nature of your work requires that you have a laptop to take with you to clients for presentations, write-ups, etc., and your employer does not provide you with one, then you may be entitled to a deduction.

And you can only deduct that portion of the cost of purchasing and maintaining the computer equipment that applies to actual business use.

As I mentioned yesterday, you should keep a log to document business use of a required home computer. For example, a daily computer log entry could indicate:

  • One hour of reading and answering business e-mails.
  • One hour of word processing for business correspondence to Client A and Client C.
  • Two hours of word processing business proposal for Client E.
  • One hour of Internet research on topic C for business project A.
  • ½ hour reading and answering personal e-mails.

Total Daily Useage = 5½ hours.

New Jersey tax pro Robert D. Flach has been preparing 1040s for individuals since 1972.

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