How to Calculate Depreciation on Computer Equipment
Managing taxes for a small business is an important but somewhat complicated task. Every small business however uses computers and computer equipment and can benefit from taking depreciation on this equipment as a tax deduction. Claiming depreciation costs can be fairly straightforward but it is important you are careful to follow the rules.
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Instructions
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Find the cost you paid for the computer equipment. Depreciation starts when the computer equipment is placed in service. The computer equipment needs to have been purchased new.
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Use the straight line method of depreciation. Computer equipment is allowed a five-year deduction period. The straight line method is the easiest to use. You will deduct the cost of the equipment evenly over five years until it is completely depreciated.
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Consider the use of the equipment you will have to prorate the deprecation if the computer equipment is used on something other than the business. If you use the computer equipment 80 percent of the time for business, you can only deduct 80 percent of the cost.
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Use IRS Form 4562 to calculate and report your depreciation. The IRS rules are incredibly complex and they often change, so you should at the very least carefully read over the IRS forms and rules to be aware of any exceptions or limitation. Section 179 is the section of code dealing with deprecation, and it is explained in IRS publication 946.
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