In August of 2008 I made my business legitimate. In 2007 and prior I’ve purchased plenty of equipment for my business. Can I claim those equipment for my 2008 expenses? Although I don’t have most of the receipts for those equipment. Also can I claim mileage, registration and insurance for my vehicle, but my vehicle has two registered owners on it (myself and my father) my father doesn’t do business with me and also I have a regular 9-5 job which doesn’t deal with my business. Thank You.
One Response to “Can I Claim Past Equipments for my Business?”
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November 26th, 2009 at 11:30 pm
If you have equipment used exclusively for your business, you can deduct depreciation expenses. For “useful life” depreciation, you deduct a fraction of the equipment value each year for as long as the equipment is expected to last. For example, if it is supposed to last 10 years, then you deduct 1/10 of the initial cost each year.
For accelerated depreciation, you can deduct twice as much per year, but only for the first half of the useful life. So you would deduct 1/5 of the cost each year for the first 5 years, but then you wouldn’t have anything left to deduct for the next 5 years.
Single year accelerated depreciation has been allowed in recent years. For this, you can deduct the entire cost in the year the equipment is purchased. Because you purchased it in 2007, you could only take this single-year deduction in 2007. You could file an amended 1040-X for the year 2007, include this deduction, and then possibly receive a refund of taxes you paid in 2007. You should also make sure that you reported all your business income in 2007 (legitimate or not), because if you are going to start claiming depreciation expenses for a lot of equipment bought in 2007, it will be logical to assume that you had sufficient related income for you to make that investment.
Because you don’t have receipts, you should try to establish what the market price is for the equipment you purchased. If you can get catalogs, print adds, or online item descriptions of the items (same or similar manufacturers and item type), keep these with your tax records. If you do get audited, you will at least be able to show a good-faith basis for your deductions.
The accelerated depreciation expense for your vehicle cannot be taken unless you use it more than 50% for business. You need to keep track of the business mileage and total mileage. Then you can deduct actual expenses (useful life depreciation, fuel, insurance, service and repairs, etc.) multiplied by (business mileage)/(total mileage). Or, you can deduct a straight mileage allowance (currently this is $0.585 per mile driven for your business). So if you drive 100 miles per month for business, you could deduct $58.50 per month or $702 for the year.
Hope this helps!