Assets are your larger business purchases like computers, manufacturing equipment, furniture, tools, and so on. They’re the tangible items that last longer than a year, and wear out or lose value over time. To be an asset, the item must help you generate your business income.
Typically, the cost of an asset is spread out over a period of years, known as “depreciation.” A new IRS rule for 2016 —the De Minimis Expense Threshold—lets you deduct the entire cost of items (less than $2,500) as an expense instead of an asset. When you declare business assets as an expense, it usually means you get a larger deduction.
Items less than $2,500 can still be claimed as assets, though most small businesses prefer to claim them as expenses. If claiming assets is more beneficial to your tax situation, we recommend double-checking with our TurboTax AnswerXChange team to confirm.
We automatically categorize these transactions for you as assets:
- Apps/software/web services (> $200)
- Computers (asset, usually > $200)
- Copiers (asset, usually > $200)
- Furniture (asset, usually > $200)
- Other tools and equipment (> $200)
- Phone (asset, usually > $200)
- Photo/video equipment (> $200)
Heads up : If the purchase price of these types of items is more than $2,500, you have to claim it as an asset. At annual tax time, TurboTax or your tax pro will help you set up the depreciation schedule (or claim a Section 179 deduction ) to use for the item.