Can I use past expenses as a tax deduction?

Submitted by agm_93 t3_yi2eu5 in personalfinance

I'm starting a full-time role as a contractor at a tech company. I was thinking perhaps I can use a past expense such as a MacBook for tax deductions. I'd be using this MacBook for work, but I bought it a few years ago. Any clue if this is possible?

If not, how much would a $1,500 MacBook save me in taxes if I were to buy a new one?

Thanks!

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AloneWithFood t1_iugwj7h wrote

Your tax write-off is not a tax credit. If I buy a $1,000 item and it's tax deductible. You won't pay taxed on that $1,000.

So if you make 100k you'd only pay taxes on 99k. Let's say you pay 30% taxes, 30% of 100k is 30k and 30% of 99k would be 29.7k. you'd save $300 in taxes but still spent 1k on the item.

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AloneWithFood t1_iuh13mz wrote

Replying to agm_93 (#373,636)

10% for individual income of $9,875 or less ($19,750 if married filing jointly) 12% for individual income over $9,875 ($19,750 if married filing jointly) 24% for individual income over $40,125 ($80,250 if married filing jointly) 32% for individual income over $85,525 ($171,050 if married filing jointly)

What this means is for the first $9,875 earned you pay 10% tax. Then for income earned $9,876-$40,125 you pay 12%. And so on and so on.

So if you earned $85,525 you won't pay exactly 32% taxes because for the first 9.8k you paid 10% and for the rest up to 40k you paid 24% and so on.

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zffch t1_iuh1w73 wrote

Yes, you can deduct depreciation on an asset converted from personal to business use. Until the end of 2022 you're allowed to take 100% bonus depreciation in the first year you put an asset into service, so no need to worry about tracking depreciation year over year, you can take the full deduction immediately.

However, the deduction would be based on the fair market value when you convert it to business use, not what it was worth when you bought it. So you have to figure out what a used, few years old MacBook would sell for, and deduct that, not its original price. Unless it's somehow worth more used than new, in that case only deduct the original cost.

You also have to determine how much you use it for personal vs business purposes and only deduct the appropriate percentage, you can't deduct the whole amount unless you use it 100% for business.

So for example, say you look on ebay and determine that your computer would sell for about $800 used. And say you use it 60% for business use. You can deduct $800 * 60% = $480. Since 100% bonus depreciation is still in effect, you can deduct that whole amount this year (otherwise you'd have to split that deduction over the next 5 years).

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