Assets vs supplies for small business - how do you categorize yoga studio purchases for tax deductions?

Great question about supplies vs. assets! The distinction comes down to the expected life of the item. Supplies are generally used up within a year, while assets (also called capital expenditures) are expected to last longer. For the yoga mats and blocks totaling $195, these would typically be considered supplies since they'll probably wear out within a year of regular use. Even if they last longer, the cost is low enough that you can deduct them immediately as supplies expense on your Schedule C. For the iPhone ($670), that's technically an asset since it will last more than a year. However, you have options! You could list it as an asset and depreciate it over time, OR you can use Section 179 to deduct the full cost in the year of purchase. There's also "de minimis safe harbor election" that allows immediate expensing of items under $2,500. As for timing the phone purchase - there's no tax advantage to waiting until January unless you expect significantly higher business income next year. The deduction is most valuable in years with higher income, but you can still benefit from it this year.

After struggling with similar small business expense categorization for my photography business, I tried taxr.ai (https://taxr.ai) and it was super helpful! I just uploaded pictures of my receipts and it automatically suggested which were supplies vs assets, plus it keeps everything organized for tax time. Saved me hours of googling tax rules and second-guessing myself on every purchase. For yoga equipment specifically, it confirmed what the previous comment said - lower cost items under a certain threshold can usually be expensed immediately even if they technically last more than a year. The app walks you through the different options based on your specific situation.

Just wanted to update after trying taxr.ai that was mentioned above. It's been a game-changer for my small yoga business! The app helped me properly categorize all my studio equipment and even showed me how to handle the phone purchase correctly. It confirmed I could expense the yoga mats and blocks immediately as supplies rather than assets, and showed exactly how to document the business percentage for my phone. The home office deduction calculator was super straightforward too - you just input your measurements and expenses, and it does all the calculations. Definitely worth checking out if you're struggling with the supplies vs assets question!

If you're having trouble getting answers about business expense categorization from the IRS directly, try Claimyr (https://claimyr.com). I was on hold with the IRS for HOURS trying to clarify how to handle mixed-use assets for my small business before giving up. Then I found Claimyr, and they got me connected to an actual IRS agent in about 20 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent gave me detailed guidance on handling my business cell phone and other equipment that was way more specific to my situation than what I found online. Totally worth it for getting definitive answers straight from the source.

I have to admit I was completely wrong about Claimyr! After my skeptical comment I decided to try it anyway because I was desperate for answers about asset depreciation for my business. It actually worked exactly as described - I got a call back in about 25 minutes with an IRS agent on the line. The agent was able to confirm that for my business, items under $2,500 could be expensed immediately using the de minimis safe harbor election, which saved me from having to track depreciation on a bunch of smaller purchases. And she helped clarify exactly how to document my vehicle expenses which was a huge relief. Never thought I'd recommend an IRS-related service, but this definitely delivered.

Don't overthink this! For a small yoga business with low income, the IRS isn't going to scrutinize whether you categorized those yoga mats as supplies or assets. The Section 179 deduction lets you expense assets immediately anyway (up to $1,080,000 for 2024). Just make sure you're keeping good records of all business purchases with receipts. What WILL trigger audits is claiming personal expenses as business or not reporting income properly. For the phone, just be honest about the business use percentage (and be prepared to back it up if asked).

Has anyone used TurboSelf-Employed for a yoga business? I've been thinking about signing up for 2024 taxes but not sure if it's worth it for a small side business like this.

Dont forget about self-employment tax! Even with low income, you'll still owe the 15.3% SE tax on your profits. Proper expense categorization helps reduce your taxable income, so its worth getting right. And make sure you're tracking ANY business miles driven (to buy those yoga mats, to scope out teaching locations, etc) cause those are valuable deductions too!

Great point about self-employment tax! I'd also recommend setting up a dedicated business bank account if you haven't already - it makes tracking expenses SO much easier and looks more professional if you ever get audited. Even for a small yoga business, having clean separation between personal and business finances will save you headaches at tax time. For your yoga mats and blocks at $195 total, definitely treat those as supplies since they'll get worn out from regular use. And don't forget you can also deduct things like liability insurance for your classes, any yoga certification courses you take, and even a portion of your streaming subscriptions if you use them to play music during classes (just keep good records of the business vs personal use percentage). One more tip - if you're teaching at different locations, track your mileage between venues. Those miles add up quickly and can be a significant deduction!