What You Need
- A filing system for receipts
- A log/notebook
- A legit business or job directly related to the equipment purchased
InstructionsA couple years back the folks at Sound and Vision gave a very useful list breaking down in detail how anyone can legitimately deduct home theater equipment with some moderately involved business-filing footwork coupled with detailed records. It's not too late to save a little money on your...ahem PS3 investments...but even if you've already filed, you can start collecting those receipts and filing for a business for '10 tax time following these steps:
1. Become involved with a business related to the tech purchased: for home electronics deductions to qualify from the perspective of the IRS, you'll need to prove the equipment you purchased is necessary to get your work done, predominately used for business use, and directly related to a legit business with adequate income. Starting up an ad-free blog which you update once every month praising the Apple iPhone won't legitimize righting off the device from the perspective of the IRS. But if you write apps for it, you'd likely be in clear waters.
2. 51% for Business: So you're working on a paid project where you had to invest in some external hard drives to store video and sound files...but you also happen to use it to store your personal collection of Lady Gaga tunes. Make sure that 51% of that drive is used for work for a legitimate write off. This is called the 50% rule.
3. Deduct by Depreciation: for those items that pass muster in regards to 50% rule above, but that have the high potential to be used for personal enjoyment/activity (your laptop, cell phones, company car, etc), you're best advised to write-off only a portion of the depreciation value by deducting a smaller, but safer percentage of the cost each year.
4. Keep Them Receipts and Keep a Usage Log! The safest bet for proving your beloved dual use home electronics is legit to the IRS is keeping detailed logs of time used for personal use vs. periods when your device was actually putting in work. Keeping your receipts and creating a business account for electronics (and other) business related purchases further spells out you mean business when using your equipment for business.
5. Connect the Dots: When we say connect the dots, we mean to check how everything related to your work is interconnected. You purchased a laptop and external monitor, but had to also purchase some USB cables later and some cable management products. These would all be deductible if your setup was used for work. And especially relevant in regards to paying for software, software updates and other ongoing costs of keeping your machine running.
6. Set Aside a Work Zone: We work specifically in a small space at home that is designated for work, keeping all our work computing/office equipment neatly organized within the space. Designated a space for work makes it easier to separate work tasks from personal time, alongside making it easier to include office gear like task chairs and desks alongside your tech gear for deduction. You may also be able to write off some or all of your home office from your rent/mortgage, depending upon your employment situation.
Originally posted April 17 2008