Accounting, Payroll & Pension Issues/Question

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Question
I'm a little confused by this. I own a Compaq computer and rent a Motor Vehicle. Can I expense both on my business' income statement? But then the income statement also has a Depreciation line.  So can I also depreciate these items on my income statement? Thanks.

Answer
First, let's discuss the Compaq computer. Assets are depreciated beginning when they are used in the business. Computers are normally depreciated over 5 years. However, often assets are expensed if their cost is not too large. If, for example, your computer cost less then $1,000, then you might consider expensing the cost rather than capitalizing and depreciating the cost.

Now, the motor vehicle. Normally one would simply expense the business portion on the rent payments. Since the motor vehicle is not owned by you, you are renting, you cannot capitalize and depreciate the asset.

You can deduct only the busiess portion on the rent expenses. That is normally based on the business portion of mileage. You should also consider whether mileage expense is greater. Currently the business mileage rate is $0.56 per mile.

Please carefully review the IRS materials related to both depreciation and automobile expenses. What I have written here is simplified.

Accounting, Payroll & Pension Issues

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Arthur Naman

Expertise

General accounting and bookkeeping questions. Specific questions pertaining to: monthly bookkeeping, preparing financial reports; reconciling accounts.

I cannot answer questions pertaining to pension or retirement planning.

This is not a forum to have homework answered. Please do your own homework.

Experience

30 years' experience doing tax and accounting work

Education/Credentials
MPA from Univ. of Texas at Austin, MBA Golden Gate Univ, San Francisco CA

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