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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22696
Experience:  Taxes, Immigration, Labor Relations
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Hello! I have questions about office equipment depreciation

Resolved Question:

Hello! I have questions about office equipment depreciation and charity donations. Thanks in advance for your help!

I have heard that one can deduct depreciation for items such as personal computers, office furniture, etc. for the percentage of time spent on tax preparation and investments. My questions are as follows:
--Is this true, and if so, what are the limits on what can be depreciated (furniture and electronics? electricity? internet connection? home office space?). And, how can you keep records to satisfactorily indicate the percentage of times spent on such tasks. Literally logging everything I do in my home office (to get time spent on personal vs. time spend on taxes/investments) will be inordinately burdensome, as it is quite variable day-to-day. Is there an acceptable heuristic?
--Can I similarly depreciate such things for business use, when I am an employee who does not qualify for the home office deduction (not my primary place of work). For example, if I use my office equipment for business purposes 10% of the time, can I depreciate 10% of the equipment (subject to the floor on out of pocket employee expenses)?


On a different note, I am moving and donating a ton to charity -- thousands of dollars worth of good condition household items and furniture. I don't want to deal with the hassle of getting anything appraised or getting excess documentation. If I donate my belongings in batches totally under $500 each, will I be ok with 1 receipt for each $500 batch (just a plain receipt from Goodwill or similar places where they don't itemize your donations) up to a grand total of $5000 (so, 10 separate batches) without needed more extensive documentation? How do I prove what items I donated if the IRS questions me?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

LEV :

Hi and welcome to Just Answer!
If you are an employer - you may deduct your employee's business expenses. Such expenses includes depreciation of personal assets used for business purposes. Computers are depreciated over 5 years and office furniture is depreciated over 7 years. If assets are used 10% for business purposes - you may depreciate 10% of their value. No deduction is allowed for personal use.
You may not deduct depreciation for items tax preparation and investments if same items are used for personal purposes.

LEV :

Depreciation is calculated on form 4562 - www.irs.gov/pub/irs-pdf/f4562.pdf
You generally deduct your employee business expenses (including depreciation on form 2106 - http://www.irs.gov/pub/irs-pdf/f2106.pdf
and will include the total into as a miscellaneous itemized deduction subject to the 2% of adjusted gross income floor on schedule A - http://www.irs.gov/pub/irs-pdf/f1040sa.pdf

LEV :

You may deduct the cost of the Internet - for instance if you are using internet 10% for business purposes - you will deduct 10% of Internet connection charges.
If you use part of your home for business, you may be able to deduct expenses for the business use of your home. Here are things you need to know about the Home Office deduction


1. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly:


--as your principal place of business, or


--as a place to meet or deal with patients, clients or customers in the normal course of your business, or


--in any connection with your trade or business where the business portion of your home is a separate structure not attached to your home.


2. For certain storage use, rental use, or daycare-facility use, you are required to use the property regularly but not exclusively.


3. Generally, the amount you can deduct depends on the percentage of your home used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.


4. Use Form 8829, Expenses for Business Use of Your Home to figure your home office deduction - http://www.irs.gov/file_source/pub/irs-pdf/f8829.pdf .


5. As you are an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be for the convenience of your employer.

LEV :

To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.
Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible.
If your total deduction for all noncash contributions for the year is over $500 but less than $5000, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return - http://www.irs.gov/file_source/pub/irs-pdf/f8283.pdf
If you claim a deduction over $500 but not over $5,000 for a noncash charitable contribution, you must have the acknowledgment and written records from charitable organization. Your records must also include:
-- How you got the property, for example, by purchase, gift, bequest, inheritance, or exchange,
-- The approximate date you got the property or, if created, produced, or manufactured by or for you, the approximate date the property was substantially completed, and
-- The cost or other basis, and any adjustments to the basis, of property held less than 12 months and, if available, the cost or other basis of property held 12 months or more.

Customer:

Thanks for the info, but that doesn't answer my question. I already know *how* to depreciate items, my questions were: what records are necessary to keep to prove the percentage of time spent using equipment for a

Customer:

Thanks for the info, but that doesn't answer my question. I already know *how* to depreciate items, my questions were: was what records are necessary to keep to prove the percentage of time spent using equipment for a

Customer:

Thanks for the info, but that doesn't answer my question. I already know *how* to depreciate items, my questions were 1) what records are necessary to keep to prove the percentage of time spent using equipment 2)can personal equipment for business purposes be depreciated according to percentage of time used for business purposes when I am an employee and do NOT qualify for the home office deduction and 3) the charity question.

LEV :

what records are necessary to keep to prove the percentage of time spent using equipment
There is no specific requirements for records. You generally expected to keep a record about time use for personal and business purposes.

Customer:

But what does that mean? Every single time I use my computer for anything I have to log the time spent and the purpose? Surely there are acceptable heuristics.

LEV :

2)can personal equipment for business purposes be depreciated according to percentage of time used for business purposes when I am an employee and do NOT qualify for the home office deduction
Yes - you may depreciate personal assets used for business purposes as an employee - that is not related to deducting the home office. As I mentioned above - If assets are used 10% for business purposes - you may depreciate 10% of their value. No deduction is allowed for personal use.

LEV :

But what does that mean? Every single time I use my computer for anything I have to log the time spent and the purpose? Surely there are acceptable heuristics.
Generally such records are rare - and if percentage of use is realistic - there should not be any questions from the IRS. However - if the IRS disagree with your statement - you may provide a daily use record - such record would be acceptable. If you have no record and the IRS for whatever reason disagree with your deduction - you have no proof - and there is a risk that your deduction could be disallowed.

LEV :

3) the charity question.
The question related to charitable deduction I posted above. Can you see it or you want me to post it again? Documentation requirements are based on the amount you deduct - not on the amount of each contribution during the tax year.

Customer:

i see it now, wasn't showing up earlier

LEV :

Sorry for technical issues. Please review and let me know if any clarification needed.

Customer:

upon reading Form 8283, my understanding is that I only have to provide all the information you listed (how acquired, cost basis, etc.) if any individual item donated is over $500. So I interpret that if I am donating large bundles of items all worth less than $500, then I don't have to fill out that section of the form. I guess with #1 I was hoping for some generally accepted trick other than a daily log (a daily log for 365 days seems unreasonable) -- i.e., a daily log for a few weeks and then extrapolating. But it seems you are saying that your only advice is daily exhaustive log or take my chances with no records?

Customer:

Anyway, thank you for your time

LEV :

But it seems you are saying that your only advice is daily exhaustive log or take my chances with no records?
You do not need to provide any additional records with your tax return.
However - in case of audit - you are required to proof your deductions. As I mentioned - there is no specific requirements for supporting documents - but if you provide NO supporting documents - there is a risk that the auditor could disallow your deduction. If you want to avoid such situations - you need to keep records.
Assuming worth case scenario - that is rare but possible - your deductions are disallowed... what you will do? You either agree with the auditor and pay additional tax liability (plus penalties and interest) OR file an appeal and your case will be tried in the Tax Court.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22696
Experience: Taxes, Immigration, Labor Relations
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