The computer tax write-off is a deduction that is often misunderstood. One of the most important steps to writing off your computer, is to first determine whether or not you are eligible. In order to evaluate your situation and complete the proper documentation, there are a few factors that need to be considered.
Determining Use for Computer
In order to write off your computer you must determine what the primary use for it is. If it is solely for personal use, it would not be eligible for a write-off. If the computer was purchased for educational purposes, it is still considered to be personal use. The exception to this rule is when the computer is issued from the school and billed later through tuition. This would then be considered an educational use and can be written off. If you are self-employed, take the percentage of time that you spend doing business on it and that is the portion you can write off. Depreciation also factors into the cost when reporting and will be considered for the next 3 to 5 years. Employees need to meet 2 qualifications in order to write off their computers. First, the computer needs to be used for business only. Second, the cost needs to be at least 2% above your adjusted gross income. If you fulfill both requirements, you can write off the computer.
Calculating Internet Deduction
Decide what percent of the time you spend doing business online. Also take into consideration the other members in your household that have access to and use the Internet on a regular basis. Once you determine the proper percentage, evaluate your monthly statement. Take the percent you decided on, of the total monthly bill. If your costs are consistent from month to month, multiply your product by 12. If the costs vary, you will need to find the amount each month, and then the sum for the year. Take note of any other charges such as cable TV to avoid deducting those as well.
Completing Tax Forms
Taxes can be filed on-line through several websites, with the help of a tax software or via mail. If you plan on mailing in your forms, you will need to pick one up from the local post office, school, library, village hall or IRS office. Those who are self-employed will enter the cost on the Schedule C form. If you are deducting the computer cost as an employee, it can be listed on the Schedule A 1040 form as an itemized deduction. For Internet deductions, use the Schedule C and determine the proper category for your Internet use. If you spend most of your time online advertising, enter the amount under that section. If you mainly pay bills and contact clients via Internet, you can enter the amount under the office section. Once you are finished, the remainder of the 1040 form can be accurately completed. It is also important to save any documentation up to 7 years after you file.