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Senior Explorer ***

small tool and equitment an asset?

Is there a rule / law around what can be classify as asset vs expense or it up to you? I read something about $500 before 2016 and $2500 after. Let say i purchase a small tool and equipment use to produce product cost $200 and $700.  Can i put in asset for depreciation or it should be expense? 

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Best answer 05-25-2019

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Established Community Backer ***

Re: small tool and equitment an asset?

There is no rule that says you cannot depreciate small tools as assets BUT the safe harbor de minimis rule you refer to allows you to up front expense tools and equipment including computers whose total cost Per Line Item including tax shipping install is no more than $2500 each.

 

You could deduct 10 tools @ 2000 each for a 20k deduction up front and they do not go on depreciation schedule

 

So to answer your question it is up to you.

Established Community Backer ***

Re: small tool and equitment an asset?


@fd_com wrote:

@john-pero so it really up to me if i want it as expense or asset?


Yes, it is up to you, AND your tax accountant. There is no rule that says you cannot depreciation as assets your purchases that otherwise would qualify as safe harbor de minimis under the $2500 per line item limit. But once you start items on depreciation they stay on depreciation schedule through their expected life.

 

Tax Act of 2017 also dramatically raised the dollar amounts that a company can claim full up front expenses for. Keep in mind that certain expenses always have to be depreciated - such as buildings and improvements to or attachments to said buildings. Half a roof replacement is considered repair but a full roof is an asset.

3 Comments
Established Community Backer ***

Re: small tool and equitment an asset?

There is no rule that says you cannot depreciate small tools as assets BUT the safe harbor de minimis rule you refer to allows you to up front expense tools and equipment including computers whose total cost Per Line Item including tax shipping install is no more than $2500 each.

 

You could deduct 10 tools @ 2000 each for a 20k deduction up front and they do not go on depreciation schedule

 

So to answer your question it is up to you.

Senior Explorer ***

Re: small tool and equitment an asset?

@john-pero so it really up to me if i want it as expense or asset?

Established Community Backer ***

Re: small tool and equitment an asset?


@fd_com wrote:

@john-pero so it really up to me if i want it as expense or asset?


Yes, it is up to you, AND your tax accountant. There is no rule that says you cannot depreciation as assets your purchases that otherwise would qualify as safe harbor de minimis under the $2500 per line item limit. But once you start items on depreciation they stay on depreciation schedule through their expected life.

 

Tax Act of 2017 also dramatically raised the dollar amounts that a company can claim full up front expenses for. Keep in mind that certain expenses always have to be depreciated - such as buildings and improvements to or attachments to said buildings. Half a roof replacement is considered repair but a full roof is an asset.