Question
Can I deduct as a business expense the entire acquisition cost of a new computer that I purchased for my business or do I have to use depreciation?
Answer

You may be able to deduct the acquisition cost of a computer purchased for business use in several ways:

  • Under Internal Revenue Code section 179, you can expense the acquisition cost of the computer if the computer is qualifying property under section 179, by electing to recover all or part of the cost up to a dollar limit, by deducting the cost in the year you place the computer in service. If there's any remaining cost, you can either depreciate it with a special depreciation allowance in the year you place the computer in service if the computer is qualified property or you can depreciate any remaining cost over a 5-year recovery period.
  • The special depreciation allowance is 100% for qualified property acquired and placed in service after September 27, 2017.
  • Alternatively, you can depreciate the acquisition cost over a 5-year recovery period in the year you place the computer in service, if you don't elect to expense any of the cost under section 179, the computer isn't eligible for the 100% special depreciation allowance in the year you place the computer in service, or you decide to elect out of any special depreciation allowance for the class of property that includes computers.
  • You can never deduct more than the acquisition cost.

Note: For taxable years beginning in 2018, a taxpayer may expense up to $1,000,000 (the dollar limit) of the cost of the section 179 property placed in service during that taxable year. The $1,000,000 dollar limit amount is reduced by the amount by which the cost of the section 179 property placed in service during the taxable year exceeds $2,500,000.