The average cost of home appliances can be significant. Depending on your budget and the size of your home, purchasing new devices can be an upfront investment. The good news is you may be able to write off some or all of the expenses for income tax purposes. The bad news is that not all purchases are eligible for a tax deduction.
To qualify as a deduction, specific stringent IRS rules must be met. Keep in mind that only the costs directly related to usage in your home office qualify for this type of deduction. If you’re ready to purchase new appliances, here’s everything you need to know about deducting their cost.
Determining the Cost of Home Appliances for Tax Purposes
The cost of a home appliance for tax purposes is the amount you paid for the item, including any installation and removal costs, plus sales taxes. If you paid for the item over time (i.e. a lease or payment plan), you need to calculate the total amount of payments to find the cost of the item.
Keep in mind that if you purchase a home appliance during the tax year, you must include the amount of the purchase price in your gross income. The cost of the item will be deducted from your gross income during the income tax return process, resulting in a smaller amount of taxable income. If you paid cash for the item, you might be eligible to deduct the cost on your tax return.
Qualifying Home Appliances
To qualify for a tax deduction, the home appliance must be used for general household purposes. Therefore, appliances used exclusively for business purposes do not qualify for a tax deduction. Keep in mind that the IRS is particular in the guidelines for qualifying appliances. If you purchase an appliance and later discover it does not qualify for a tax deduction, the write-off may be deferred until the following year.
Requirements for Deducting Home Appliance Costs
As previously mentioned, certain IRS rules must be met to qualify for a tax deduction. Generally, the appliance must be used in your home office and not in a residential area. If the appliance is used in a residential area, it may qualify as a “decorating expense” but not as a “repair or maintenance expense”.
The costs are not deductible if the home appliance is used in a business area. If the appliance is used in residential and business areas, the IRS requires you to allocate the cost between the two. The cost of the appliance may be deducted if used in a home office.
Writing Off the Cost of New Appliances
If you are purchasing a new home appliance, you may be able to deduct the cost on your tax return. Keep in mind that the same IRS rules apply for deducting the cost of new appliances as for used appliances. Additionally, the new appliance must be used in your home office and not in a residential area.
This means the appliance cannot be used in the living area of your home. If the appliance is used in a residential area, it may qualify as a decorating expense but not a repair and maintenance expense. If the appliance is used in a residential area and a business area, you must allocate the cost between the two. The cost of the appliance may be deducted if used in a home office.
Other Tax Benefits of Purchasing Home Appliances
Beyond deducting the cost of new and used appliances on your tax return, you may also be eligible for other tax benefits. Keep in mind that not all appliances provide the same benefits.
For example, if you purchase a new air conditioner, you may be eligible for a tax credit. For many taxpayers, the benefits of purchasing new appliances outweigh the benefits of purchasing used appliances. New appliances are often energy-efficient, which may reduce the amount of taxes you owe each year.
When You Cannot Deduct the Cost of New Appliances
If you purchase new appliances for personal use, you may be able to deduct the cost on your tax return. However, if you purchase appliances for business use, the costs are not deductible.
In addition, if you purchase new appliances for business use, you cannot deduct the cost for personal use. Should you decide to purchase new appliances for business purposes, keep in mind that the cost must be capitalized.
This means the cost of the appliances cannot be deducted in the year they are purchased. Instead, they must be included as part of the total cost of the business.
Final Words
If you purchase new appliances for personal use, you may be able to deduct the cost on your tax return. Keep in mind that the same IRS rules apply for deducting the cost of new appliances as for used appliances. In general, the appliance must be used in your home office and not in a residential area. If the appliance is used in a residential area, it may qualify as a “decorating expense” but not as a “repair or maintenance expense”.
If the appliance is used in a business area, the costs are not deductible. If the appliance is used in residential and business areas, you must allocate the cost between the two. The cost of the appliance may be deducted if used in a home office.
