In terms of tax implications, am I better off buying a laptop out of pocket and writing it off as a business expense, or buying it with company funds and depreciating it as a business asset?
depends. you don’t mention what, if any, business you run or any other personal tax info.
Which ever way reduces self employment income is usually most beneficial.
I own an REI company, that’s what I could buy it under. I also own other rental property as well, so in general I have a lot of tax write-offs to begin with.
Again, you don’t provide much in the way of specifics, when looking for a specific answer.
If the REI co is a Schedule C (generates Self employment tax) then having the REI purchase the laptop generates the most tax savings. If other stuff, then something else.
If you want a more specific answer, then you will have to provide more specific parameters. my crystal ball is in the shop this week.
mcwagner,
Is that crystal ball tax-deductible?
LOL Furnishedowner
no, but the repairs are
It depends. If which of them has the higest advantage.
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I hope I can help you with this one.
Provided the laptop will be used 100% in the business with no personal use, then it would normally be depreciated as a capital asset. Section 179 expensing rules may allow you to expense the full amount of the purchase.
I don’t see how purchasing with your own funds then receiving a reimbursment from the company, or purchasing with company funds, has any bearing on the tax treatment. In both cases, a capital asset is purchased by the company and paid for with company funds.
ya, but
if it’s a Sch C, then the “company” saves 45% tax of whatever is expensed.
If it’s a C corp, tax savings may be as low as 5% of the expense.
Or in some loss situations, even zero, or deferred. Or, if it’s something else, then something else. Specific answers need specific questions.
So to tell him how much tax he saves (and thus how much “better off” he is), we have to know how the “company” is being taxed.
Mark,
C, S, or sole prop is not the relevant factor. The question was whether Jake should buy the computer with his own funds then have the company reimburse him, or, use company funds to purchase the computer. Jake is not asking what business entity type is better for equipment purchases, he is asking if changing the method used to purchase equipment for his established business can mitigate his taxes
In the first instance the company “buys” a computer from Jake (presumably at Jake’s cost), whereas in the second instance the company buys the computer directly from the retailer. In either case, company funds are disbursed to acquire a capital asset for the company. In each case the general bookkeeping entires are debit the cash account and credit the capital equipment account.
My answer is the tax treatment (that is appropriate for the business entity) is the same regardless of the which of the two purchase methods got the computer for the business.
Do you agree?
LOL@crystal ball!