[Swalden123]

I’m not sure how the US tax system works, it seems doubtful that if you spend money on an asset you can deduct the full amount from the tax you pay? In Australia you would basically deduct the purchase price of a MacBook Pro off the total profit you calculate tax on so it ends up being around a 30% discount on the MacBook Pro. If it’s similar in the US at all spending profit pointlessly would just be throwing money away?

[lgregg]

I have photography equipment that I used while working a media consultant. It was a 100% deductible business expense back then, I get a tax break every year as they continue to "depreciate". It's been a few years, I still do some photography on the side mostly portraits or headshots.

[jjeaff]

I don't think deduction means what you think it means. If you deduct 100%, you aren't deducting it from the total tax owed. You are deducting from your total taxable income.

So if your tax rate is 30% and you spent $1,000 on a camera, you will save $300 on taxes. So the camera is not free. But you do get it for effectively $700.

Additionally, you can't deduct the value of a purchase AND depreciate it every year. You do one or the other. And which one you do is dictated by tax law.

Double dipping is tax fraud.

[jakobegger]

> Additionally, you can't deduct the value of a purchase AND depreciate it every year.

In Austria we have an "investment bonus" that allows you to do exactly that (with a limit). If you are in the highest tax bracket (50%), this means you can get around 5000€ of equipment effectively for free every year.

[bryanrasmussen]

surely that depends on the type of company you have? If you have a personal company then I expect it is like that, if on the other hand you are incorporated the full purchase should be deductible, the reasoning of course is that a product you buy for a personal company is also used for you.

[jjeaff]

No matter the type of company, deducting 100% of something does not reduce your tax burden by that amount. Multiply your tax rate times the amount of the deduction to see you tax savings. If you deduct 100% of a laptop and you or your company pays 30% tax rate, then you save about $300 because you were able to deduct.

You aren't getting the laptop for free.

[bryanrasmussen]

If a company buys a laptop for a 1000 that is an operating expense of that company, if it is a personal company that is to say you are the sole owner and it is not incorporated then you can deduct part of the cost of that laptop which I thought I already indicated. If on the other hand the company is incorporated in some way - and because I am not referring to any particular country I just mean in some way the money spent on that laptop will not be counted in the company's profits and not be taxable.

on edit: unless of course this is different in the country under discussion but in the countries I'm familiar with it works that way, also note I have not discussed depreciation which would definitely apply to a laptop.

[nodesocket]

You are right, of course it's not 100% deductible. I am not advocating spending wildly on things you don't need for the business. If you have lots of revenue and not a lot of expenses, it makes sense to splurge on physical assets you can use and then expense and in the future sell. I.E. computers, networking equipment, storage, monitors, etc. Furthermore, it also make sense to spend on things that can help you grow the business like advertising, marketing, office space, employees. Again, better to spend and get the tax deduction, and have the resources that grow the business.

[jjeaff]

If you deduct the expense, and then sell it later, your going to have to claim the sale as income. And pay tax on it.

[airbreather]

Depending on the depreciation schedule, esp for tech, it could well be viewed as close to worthless by the tax office after some years.

[jjeaff]

You don't get to expense the purchase AND depreciate the asset.

[uhoh-itsmaciek]

What if you feel your business is the right size?

[airbreather]

Try 50% if you are earning 30k a month, top tax rate kicks in at 180k per year in Oz.