- Joined
- Jun 5, 2013
- Messages
- 133
Rep Bank
$740
$740
User Power: 216%
Last year, we bought a bunch of equipment and expensed it. I filed the receipts and invoices just like I normally would.
After doing some reading, I realized it would be better for us to capitalize the purchases, rather than expense them and take a 179 deduction. A 179 deduction allows business owners to depreciate 100% of their equipment purchase in the same year they buy it. If you spend 20k on furniture in 2013, you can expense 100% of it on your 2013 taxes, instead of depreciating it over the course of years. You can also carry the deduction forward to next year if you aren't yet profitable this year. For us, the tax implications were exactly the same, but the 179 left us with much higher net profits on the books, which is important to us since we want to sell eventually.
My mistake last year? Not keeping a file/list of items that could have been eligible for 179 deductions throughout the year. Instead, I sat there in December trying to remember what equipment I had purchased in March. We keep records of all invoices, checks and receipts, but remembering every item and then going through all of those files was a waste of time. Also, I am sure I forgot a number of items.
This year, when I make an equipment/179 eligible purchase:
1. File one copy as I normally would
2. Make another copy and throw it into a "179 file" for my accountant.
At the end of the year all I will have to do is hand it over it to my accountant, who will tell our bookkeeper which items should remain expensed and which items should be capitalized.
Deciding whether it is best to 179 or expense your equipment is for you and your accountant, and there are a lot of factors to consider. However, having the organization and control to even have that choice is up to us as business owners.
After doing some reading, I realized it would be better for us to capitalize the purchases, rather than expense them and take a 179 deduction. A 179 deduction allows business owners to depreciate 100% of their equipment purchase in the same year they buy it. If you spend 20k on furniture in 2013, you can expense 100% of it on your 2013 taxes, instead of depreciating it over the course of years. You can also carry the deduction forward to next year if you aren't yet profitable this year. For us, the tax implications were exactly the same, but the 179 left us with much higher net profits on the books, which is important to us since we want to sell eventually.
My mistake last year? Not keeping a file/list of items that could have been eligible for 179 deductions throughout the year. Instead, I sat there in December trying to remember what equipment I had purchased in March. We keep records of all invoices, checks and receipts, but remembering every item and then going through all of those files was a waste of time. Also, I am sure I forgot a number of items.
This year, when I make an equipment/179 eligible purchase:
1. File one copy as I normally would
2. Make another copy and throw it into a "179 file" for my accountant.
At the end of the year all I will have to do is hand it over it to my accountant, who will tell our bookkeeper which items should remain expensed and which items should be capitalized.
Deciding whether it is best to 179 or expense your equipment is for you and your accountant, and there are a lot of factors to consider. However, having the organization and control to even have that choice is up to us as business owners.
Dislike ads? Become a Fastlane member:
Subscribe today and surround yourself with winners and millionaire mentors, not those broke friends who only want to drink beer and play video games. :-)
Access Restricted: Unlock 1,000,000+ Posts
Stop Peeking Through the Keyhole.
Open the Door.
You hit a wall because the best advice isn't free—it's earned. Since 2007, MJ DeMarco has been active here daily (99.9% active rate), building a war room for entrepreneurs who refuse to settle for mediocrity.
- Active Daily: Life-changing content posted dozens of times every day. No dead threads.
- MJ's Inner Circle: Direct access to the author of The Millionaire Fastlane.
- Vetted Network: Connect with founders scaling to 7 and 8 figures.
- Proven Roadmaps: Strategy over motivation. Execution over "hustle porn."
"SCALED TO 6-FIGURE MONTHS"
"Tips and advice here saved me from huge mistakes, others allowed me to scale my business to 6-figure months."— User MitchC
"INSANE QUALITY OF PEOPLE"
"The number of high quality people I've met from this forum has been insane. All of it predicated on building real value."— User Richard Peck
"You are the average of the five people you surround yourself with."
Are you surrounding yourself with success?
