The cost of a personal computer is generally a personal expense that is not deductible. However, if the school bills everyone, as a condition of attendance or enrollment, for proprietary computer devices and/or software available no where else, then this may qualify as an expense towards either the Lifetime Learning Credit or Hope Credit. For more information, refer to Publication 970, Tax Benefits for Higher Education.

References:

• Tax Topic 513, Educational expenses

A deduction for depreciation of a computer for business use can be expensed in the first year if qualified, or depreciated over the recovery period. To claim the expense in the first year, the property must be used more than 50% for business use, and meet the other requirements for expensing.

The 2003 Jobs and Growth Tax Relief Reconciliation Act of 2003 raised the aggregate cost that can be expensed for any tax year after 2002 and before 2006 to $100,000. The new law also expanded the definition of Code Section 179 property to include off-the shelf computer software. See Code Section 179 for the expanded definition.

If you make a choice to depreciate the property you can claim a special depreciation allowance for qualified property you acquired in service after September 10, 2001 and before January 1, 2005. The allowance is a depreciation deduction equal to 30% of the property's depreciable basis. The special depreciation is figured before you calculate your regular depreciation. To qualify for the special deduction the property must:

See Publication 946, How to Depreciate Property for additional information on the special deduction.

The 2003 Jobs and Growth Tax Relief Reconciliation Act of 2003 modified the bonus depreciation rule by substituting a 50% special depreciation allowance for the 30%, for property acquired after May 5, 2003 and before January 1, 2005. No binding contract for acquisition can be in effect before May 6, 2003. Property eligible for the 50% additional first-year depreciation is not eligible for the 30% additional first-year depreciation. However, an election can be made to have the 30% additional first-year depreciation deduction apply to the 50% depreciation property instead of the 50% additional firs-year depreciation deduction. It is also possible to elect not to claim the additional first-year depreciation.

References:

• Publication 946, How to Depreciate Property
• Publication 535, Business Expenses

Only property used in a trade or business or in an income production activity can be depreciated. Additionally, the property must be something that wears out or becomes obsolete and it must have a determinable useful life substantially beyond the tax year. The kinds of property that can be depreciated include, but are not limited to, machinery, equipment, buildings, vehicles, and furniture. Depreciation is a complex topic. For more information, refer to Tax Topic 704, Depreciation, or Publication 946, How to Depreciate Property , or Publication 534 (PDF) , Depreciating Property Placed in Service Before 1987.

References:

• Publication 534 (PDF) , Depreciating Property Placed in Service Before 1987
• Publication 946 , How to Depreciate Property
• Tax Topic 704 , Depreciation

You may deduct investment expenses (other than interest expenses) as miscellaneous itemized deductions on Form 1040, Schedule A (PDF), line 22, Itemized Deductions. This would include depreciation on the portion of your computer used for investment purposes, and the portion of your internet access charges used for investment purposes.

A deduction for depreciation of a computer for business use can be expensed in the first year if qualified, or depreciated over the recovery period. To claim the expense in the first year, the property must be used more than 50% for business use, and meet the other requirements for expensing.

The 2003 Jobs and Growth Act raised the aggregate cost that can be expensed for any tax year beginning after 2002 and before 2006 to $100,000. The new law also expanded the definition of Code Section 179 property to include off-the-shelf computer software. See Code Section 179 for the expanded definition. If the business use falls to 50% or less in a later year, these tax benefits may be subject to recapture. See Publication 946 , How to Depreciate Property for additional information on the special deduction.

These deductions must be reduced by 2% of your adjusted gross income. Use Form 4562 (PDF), Depreciation and Amortization, to compute the depreciation for the portion of your computer used for investment purposes.

Note: Unless the computer is used more than 50% for business purpose (as opposed to investment purposes), you cannot claim section 179 expensing of the computer or claim accelerated depreciation for it. For more information, refer to "Listed Property" in Publication 946, How to Depreciate Property.

References:

• Form 1040, Schedule A (PDF), Itemized Deductions
• Form 4562 (PDF), Depreciation and Amortization
• Publication 946, How to Depreciate Property
• Publication 535 , Business Expenses

You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is:

Use Form 4562 (PDF) , Depreciation and Amortization , to compute the depreciation. There have been recent changes to the percentage of depreciation claimed in the first year you place the property in service.

The cost of a computer purchased for business use can be expensed under section 179 in the first year if qualified, or depreciated over the recovery period. To claim the expense in the first year, the property must be used more than 50% for business use, and meet the other requirements for expensing.

The 2003 Jobs and Growth Act raised the aggregate cost that can be expensed for any tax year after 2002 and before 2006 to $100,000. The new law also expanded the definition of Code Section 179 property to include off-the shelf computer software. See Code Section 179 for the expanded definition.

If you make a choice to depreciate the property you can claim a special depreciation allowance for qualified property you acquired after September 10, 2001 and before January 1, 2005. The allowance is figured before you calculate your regular depreciation. See Publication 946 , How to Depreciate Property for additional information on the special deduction.

You cannot take a section 179 deduction for the item or claim accelerated depreciation unless your use of the computer is more than 50% business or job-related use (and you meet the two conditions listed above).

Section 179 deductions and accelerated depreciation methods are explained in Publication 946, How to Depreciate Property.

References:

• Publication 946, How to Depreciate Property
• Code Section 179

The maximum deduction (including any amounts deducted under section 179) that can be claimed for a used passenger automobile or one that is Liberty Zone property that was placed in service in 2003 is $3,060 for the first year, $4,900 for the second year, $2,950 for the third year, and $1,775 for the fourth and following years. For a new passenger automobile acquired on or before May 5, 2003 (and not Liberty Zone property), the first year deduction is limited to $7,660 (or $3,060 if the owner elects not to take the 30 percent additional bonus depreciation allowance. The 2003 Jobs and Growth Tax Relief and Reconciliation Act provided that for qualified vehicles purchased after May 5, 2003, the first-year depreciation deduction is limited to $10,710 (or $3,060 if the owner elects not to take either the 30% or the 50% bonus depreciation allowance). Subsequent year limits are the same as for used vehicles. Some what higher limits apply to owners of trucks and vans. For more information refer to Publication 946, How to Depreciate Property and Publication 463, Travel, Entertainment, Gift, and Car Expenses

References:

• Publication 463, Travel, Entertainment, Gift, and Car Expenses
• Publication 946, How to Depreciate Property

A Sole Proprietor's business use of a car or truck is claimed on line 10 of Form 1040 (PDF), Schedule C, Profit or Loss from Business or, if eligible, line 2 of Form 1040, Schedule C-EZ (PDF), Net Profit from Business. You may use either the actual expense method in calculating your car or truck expense or, if eligible, the 2003 standard mileage rate of 36 cents per mile. Depreciation expense is already included in this standard mileage rate. Depreciation is only calculated as a separate expense when using the actual expense method. Deductible employee business use of a car or truck may be taken on Form 2106 (PDF), Employee Business Expenses , or if, eligible, line 1 of Form 2106-EZ (PDF), Unreimbursed Employee Business Expenses. The car and truck expenses are then taken with other employee business expenses on line 20, Form 1040, Schedule A&B (PDF) Itemized Deductions . For more information, refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses , and Publication 535, Business Expenses .

References:

• Publication 535, Business Expenses
• Publication 463, Travel, Entertainment, Gift, and Car Expenses
• Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship)
• Form 1040, Schedule C-EZ (PDF), Unreimbursed Employee Business Expenses.
• Form 2106 (PDF), Employee Business Expenses
• Form 2106EZ (PDF), Unreimbursed Employee Business Expenses