Choosing Between De Minimis or 179 Expensing or Bonus Depreciation

You may not have considered the choices you have for deducting the assets that you buy for your business.

To create some perspective, let’s say you have seven employees who now work at least two days a week from home because of COVID-19. To facilitate this working at both the office and the home, you purchased seven laptop computers at a cost of $2,179 each.

You have five choices for deducting the computers:

  1. De minimis expensing
  2. Bonus depreciation
  3. Section 179 expensing
  4. Modified accelerated cost recovery system (MACRS) depreciation
  5. Straight-line depreciation 

You have four things to consider:

  1. What is the maximum you can deduct this year, and what if you want to deduct less?  (Do you know why you might want to deduct less?)
  2. How does this affect your Section 199A deduction if you operate as a proprietorship, a partnership, or an S corporation? (C corporations don’t qualify for the Section 199A deduction. If you operate as an LLC, you are one of the four taxable entities (proprietorship, partnership, or C or S corporation.)
  3. If you file as a proprietorship on Schedule C of your Form 1040, is there a self-employment tax issue when you sell the computers?
  4. How does your choice affect your local, county, and state personal property taxes?

As you can see, there’s much to consider. That’s why you have me. If you are going to buy assets for your business this year and you want my insights, please call me on my direct line at 909-238-5803.

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