Can a purchase made this week go on next year's tax return? Deducations & Freelance?

Question

I am freelance videographer. I NEED a new computer ASAP but I already have sufficient deducations for this year's taxes. If I purchase the computer on credit card and do not pay for it until next year (January), is it considered a purchase made for next year?

Where can I read about this?

Answer 1

what the prior poster means is that you can't actually use the computer for any purpose until January 1, 2007.

It doesn't sound like you can or want to do that.

If you haven't purchased any other assets during the year, the computer will be subject to mid-quarter depreciation, and since it's a 5 year asset only 5% of the cost will be a depreciation deduction for 2006, while 38% of the cost will be a depreciation deduction for 2007.

Of course, as far as I'm concerned you can never have too many deductions, so I wouldn't hold off on buying something if you really need it now.

to answer your credit card question, even if you are on the cash basis method of accounting (which you likely are), a purchase on a credit card is considered a cash purchase when the purchase is made. I don't know an exact cite, but go to www.irs.gov and search in the publications section for accounting methods.

Answer 2

You begin to depreciate an asset (and claim the depreciation deduction) on the date the asset is placed into service, which may not necessarily be the date the asset is acquired. So buy it now and don't "place it into service" until January 1. Then you can begin depreciating it next year.

Answer 3

If you capitalize & depreciate over 3 yrs (36 months) would only have 1/36th in this yr anyway. If cash basis taxpayer can push it all to next yr using cc - yes.