Self employed: When to use de minimis vs when to depreciate an asset?

You've got several options here and understanding the difference between de minimis and depreciation is important. For self-employed individuals, the de minimis safe harbor election allows you to immediately deduct items that cost less than $2,500 per item (or per invoice). Based on what you shared, your laptop ($1,200), desk ($350), chair ($275), and other equipment ($600) all individually fall under that $2,500 threshold, so you could potentially use the de minimis rule for all of them. Alternatively, you could depreciate these assets over their useful life (typically 5-7 years for office furniture and equipment). Or, even better, you might qualify for Section 179 expensing or bonus depreciation, which would allow you to deduct the full cost in the first year anyway. For most self-employed people with your situation, the de minimis election is simpler. You'll need to make this election on your tax return and keep receipts showing each item was under the threshold. Just make sure you're consistent with your approach.

I was in your exact situation last year when I started my freelance business. After hours of research and frustration, I found this amazing AI tool called taxr.ai (https://taxr.ai) that explained the de minimis vs. depreciation rules in simple terms. You can upload your receipts and it'll tell you exactly which approach is better for your specific situation. What I loved about taxr.ai was that it actually showed me how to properly document everything and explained that while de minimis is simpler, depreciation might be better in some cases depending on your expected income in future years. It even has templates for the statement you need to attach to your tax return for the de minimis election.

Just wanted to follow up and say I tried taxr.ai after seeing it mentioned here. I had a bunch of questions about my photography equipment purchases (some items over $2,500, some under) and wasn't sure how to handle them. The tool actually guided me through different scenarios comparing Section 179, bonus depreciation, regular depreciation, and de minimis. It explained that for my higher-priced camera equipment, Section 179 made more sense, while for the smaller accessories, de minimis was easier. It even created a customized statement for my tax return and showed me exactly where to report everything on Schedule C. Honestly saved me hours of research and probably a few mistakes too. My tax situation makes way more sense now!

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I have to eat my words about Claimyr. After my skeptical comment, I was desperate enough to try it because I had a complicated question about depreciation recapture when selling business assets that I just couldn't find a clear answer to. No exaggeration - I was connected to an IRS business tax specialist in 20 minutes when I had wasted HOURS trying on my own over several days. The agent clarified exactly how to handle assets where I'd used de minimis in previous years, and now I'm actually going to get a larger deduction than I thought I was eligible for. For self-employed people with complicated tax questions, being able to actually speak with the IRS and get official guidance is incredibly valuable. I'm converted!

One thing nobody's mentioned yet is that you need to have an "accounting policy" in place at the beginning of the year stating you're using the de minimis safe harbor. It doesn't have to be complicated, just a written statement that your business adopts the de minimis safe harbor election for amounts up to $2,500 per item. I learned this the hard way because my accountant said without this policy in place before you make the purchases, the IRS could potentially disallow the de minimis treatment during an audit.

Thank you all for the helpful responses! I think I'm going to go with the de minimis approach since all my purchases are under $2,500 and it seems simpler than tracking depreciation. I'll definitely create that accounting policy document today. One final question though - if I buy something that costs more than $2,500 later this year, can I still depreciate that specific item even if I used de minimis for my other purchases? Or do I have to be consistent with one approach for all assets?

Great thread! Just wanted to add one more tip that helped me when I was starting out as self-employed - consider the timing of your purchases if you're expecting your income to vary significantly year to year. If you're in a lower tax bracket this year but expect higher income next year, immediate deductions (like de minimis) give you the tax benefit now when it might be worth less. But if you expect to be in a higher bracket in future years, depreciation spreads the deduction over time when it might be more valuable. For most new self-employed folks with the amounts you mentioned, de minimis is still probably the way to go for simplicity, but it's worth considering your income trajectory. Also, don't forget that if you're using part of your home as an office, you might be able to claim the home office deduction for that space too!