Depreciation and Book Value for Fixed Asset with Partial Personal Use

fgt · ‎February 03, 2019

Hello,

I have a computer that was purchased for my LLC for $400. It is being used 75% for business use and 25% personal. I'd like to record the asset's correct book value and depreciation. I'll be 179 depreciating the asset's full business use value this year.

I am trying to figure out what accounts to debit and credit for these transactions.

I know the entries if these was 100% business use. The part that is confusing me is the personal %. If below are the 100% business use entries, how do they change to account for the $100 personal percentage of use?

If 100% business.

purchase:

debit - $400 computer fixed asset

credit - $400 checking account

depreciation:

debit -$400 depreciation expense

credit - $400 accum depreciation

Thanks so much,

Eric

qbteachmt · ‎February 03, 2019

Don't bother with Fixed Asset and Depreciation. The IRS regulation is "$2,500 per item or invoice." A $400 computer is Expense, not Fixed Asset. And a Fixed Asset cannot truly have Mixed use; if it did, then someone is benefitting personally, such as an employee driving a company car is Taxed on the Value of that benefit.

Not this: "I'll be 179 depreciating the asset's full business use value this year."

It's Expense. If you are going to do your own taxes, make sure to stay current on all the tax rule changes, every year.

View solution in original post

fgt · ‎February 03, 2019

Thanks so much! That's very helpful. You made my day. I really appreciate your explanation.

@qbteachmt wrote:
It's Expense. If you are going to do your own taxes, make sure to stay current on all the tax rule changes, every year.

I'll certainly heed your advice here as well.

View solution in original post

qbteachmt · ‎February 03, 2019

Don't bother with Fixed Asset and Depreciation. The IRS regulation is "$2,500 per item or invoice." A $400 computer is Expense, not Fixed Asset. And a Fixed Asset cannot truly have Mixed use; if it did, then someone is benefitting personally, such as an employee driving a company car is Taxed on the Value of that benefit.

Not this: "I'll be 179 depreciating the asset's full business use value this year."

It's Expense. If you are going to do your own taxes, make sure to stay current on all the tax rule changes, every year.

fgt · ‎February 03, 2019

Thanks so much! That's very helpful. You made my day. I really appreciate your explanation.

@qbteachmt wrote:
It's Expense. If you are going to do your own taxes, make sure to stay current on all the tax rule changes, every year.

I'll certainly heed your advice here as well.

LightArtPhoto · ‎January 20, 2020

I actually have a similar question but my asset is worth more than $2,500 and I will be depreciating it across several years - how do I correctly record this? Am I right to assume that I just multiply both the credit & debit depreciation entries by percentage of business use?

MLabelMedia · ‎November 04, 2020

Same.

MLabelMedia · ‎November 04, 2020

I have the same problem as you. I sort of loathe that this question resulted in a response that didn't technically answer the question. I don't mind that it offered an alternative solution (I've been expensing items under $2500 already.) I already know the nuances of De Minimis Safe Harbor though. I need to learn more about the nuances of Section 179, specifically for the question originally asked. (It's also prudent to point out that the responder was incorrect in stating that Fixed assets cannot have personal use). If that were true, then the IRS would not give guidelines that specify our need to only write off (the business portion) of the assets use. I imagine both the responder (and the original poster) will eventually find themselves back at the question we are wondering once they go to make a purchase over $2500 (without an AFS) but wanting the maximum write-off amount in year one of the assets use (requiring Section 179 and the entry of fixed asset(s) accordingly.

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