Today TaxMama hears from Mario in New York, who wants to know.
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“How do I deduct employee expenses such as expensive tools? IRS says for items lasting over a year, they should be depreciated. It looks like forms 4562 and 2106 carrying over to Schedule A should be used, but the tools are not listed property either.
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Any help is appreciated.”
Dear Mario,
If your tools are things you buy as an employee in order to do your job, they are employee business expenses.
You’re right. Use Form 2106. And the cost is subject to 2% of your adjusted gross income.
Now, what do you write off?
My rule of thumb is that anything that costs $500 or less is written of as an expense – called ‘Small Tools’ or ‘Supplies’.
Over $500, I depreciate the cost for 5-7 years, depending on the nature of the tools.
https://www.irs.gov/publications/p946/index.html
Disregard the listed property stuff. That’s only for things like cars, cameras, and computers and such.
If you’re having trouble getting the depreciation schedule to accept your tools, call your software company and ask for their help.
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There should be a simple way to make this work – unless you’re using the wrong software.
Incidentally, these tools will qualify for Section 179 depreciation.
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So you’ll be able to use that on Form 4562, to write off the entire cost of each tool. Just be sure to keep using them on your job for the depreciable life of the tool.
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And remember, you can find answers to all kinds of questions about employee business expenses and other tax issues, free. Where? Where else? At TaxMama.com
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- IRS Publication 946 :: How to Depreciate Property
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