The New Laptop
MONEY MEETS TAX · EPISODE 07
Anaheim · Late Summer 2024
Money & Tax in this episode
Business equipment · Personal versus business use · When a deduction changes the decision
Evan’s laptop had become slow enough that he could notice it thinking.
He would click a spreadsheet.
Wait.
Open a browser tab.
Wait.
Switch between a client file and a video call.
Wait longer.
One evening, Daisy walked past the dining table while Evan was staring at a loading icon.
“It looks tired.”
“It is tired.”
“How old is it?”
“Five years.”
Daisy stopped.
“That doesn’t sound that old.”
“For a laptop?”
“For anything.”
Evan looked back at the screen.
The spreadsheet appeared.
Finally.
“I need a new one.”
Daisy pulled out the chair across from him.
“For work?”
“Mostly.”
“How much is mostly?”
Evan looked at her.
“I use it for consulting.”
“I know.”
“And my regular job sometimes.”
“What else?”
“Banking. Travel. Looking at houses.”
Daisy smiled.
“We already bought one of those.”
“Future decisions.”
“Okay.”
She looked at the laptop.
“So you use it for pretty much everything.”
“Yeah.”
“And you want a faster one.”
“Very much.”
“That seems like a reasonable place to start.”
Evan opened another browser tab.
It took four seconds.
Daisy watched.
“Maybe a very reasonable place.”
The next morning, Evan searched:
Can I deduct a laptop for my business?
The answers were encouraging.
Business equipment could be deductible.
There were rules about business use.
There were rules about depreciation.
There were rules that seemed to let some businesses deduct the cost more quickly.
Evan opened a spreadsheet.
The laptop he wanted cost $2,399.
He added sales tax.
Then he added a row.
Tax savings
He stopped.
He didn’t know what number belonged there.
He emailed Arthur.
I need to replace my laptop. I use it for consulting but also personally.
How much of it can I deduct?
Arthur replied later that afternoon.
The business-use portion may be deductible. First, estimate the percentage based on how you actually use it.
Also, buy the laptop that makes sense for the work. The deduction should follow the purchase, not drive it.
Evan read the second paragraph twice.
He replied.
Probably 70% business.
Arthur called him the next morning.
“You said seventy percent business use?”
“That’s my estimate.”
“Okay. Just make sure you have a reasonable basis for it.”
“Like tracking hours?”
“That can help. It doesn’t have to be perfect, but I wouldn’t pick seventy percent just because it gives you a better deduction.”
“I use it a lot for consulting.”
“Then document that as reasonably as you can.”
Evan looked at the laptop options on his screen.
“So if it’s seventy percent business, I deduct seventy percent?”
“Potentially. Then we determine how and when that business portion is deductible based on the applicable rules.”
“So it might not all be this year.”
“Correct.”
Evan leaned back.
“I thought equipment could be written off.”
“Sometimes it can. But ‘business expense’ doesn’t always mean the entire purchase price automatically disappears from taxable income the day you buy it.”
Evan wrote that down.
Arthur continued.
“There’s another question I care about first.”
“What?”
“Do you actually need a new laptop for the consulting work?”
Evan looked at the loading icon on his old computer.
“Yes.”
“Then start there.”
“That simple?”
“For choosing the computer, mostly.”
Arthur paused.
“Buy the machine that makes sense for the work. Keep the receipt. Keep a reasonable record of business use. Then we’ll deal with the deduction correctly.”
Evan looked at the $2,399 model again.
“So the deduction can affect the cost, but it shouldn’t decide which laptop I buy.”
“Exactly.”
That was clearer than Evan wanted it to be.
That evening, Daisy found him comparing three laptops.
“You’re still looking?”
“I narrowed it down.”
“To three?”
“There were nine.”
“That is progress.”
Evan turned the screen toward her.
“This one is probably enough.”
Daisy looked at the specifications.
“And the other two?”
“Faster processor. More memory.”
“Do you need that?”
“Maybe.”
“For the consulting?”
Evan hesitated.
“Probably not all of it.”
Daisy nodded.
“Then which one would you buy if taxes weren’t part of the decision?”
Evan looked at her.
“That’s basically what Arthur said.”
“I like Arthur.”
“You’ve never met Arthur.”
“I like this particular advice from Arthur.”
Evan turned back to the screen.
The middle model was $2,399.
The more expensive one was $3,199.
He had already calculated the possible tax effect of both.
Daisy could tell.
“You did the tax math already, didn’t you?”
“Some of it.”
She smiled.
“Of course you did.”
“A deduction changes the real cost.”
“Sure.”
“But it doesn’t make the more expensive one cheaper than the less expensive one.”
“Also true.”
Evan looked between the two models.
Daisy got up.
“For what it’s worth, I think you already know which one you need.”
“I’m still comparing.”
“Okay.”
She walked toward the kitchen.
The next morning, Evan ordered the $2,399 laptop.
It arrived two days later.
Daisy found him setting it up at the dining table.
“You decided.”
“Yesterday.”
She looked at the box.
“Same one you were leaning toward?”
“The middle one.”
“Good.”
Evan started transferring files.
The new laptop opened his spreadsheet almost immediately.
He clicked another tab.
Then another.
No waiting.
Daisy watched from the kitchen.
“Worth it?”
“So far.”
“And how much was the deduction?”
“I don’t know yet.”
She smiled.
“That sounds healthy.”
Evan looked at her.
“I’m learning.”
“I’m learning too.”
“What?”
Daisy looked at the new laptop.
“A lot about the word ‘need.’”
“Are you making fun of me?”
“A little.”
Evan went back to the screen.
This time, it was already ready.
The Tax Behind the Story
A laptop used in Evan’s consulting business can be a legitimate business asset, but personal use does not become deductible simply because he bought the computer for work. Business expenses generally must be ordinary and necessary, and expenses with both business and personal use generally need to be divided between the two.
How the business portion of the computer is recovered can depend on the facts and the tax treatment used. Business equipment may generally be depreciated, while qualifying property may be eligible for faster cost-recovery provisions when the applicable requirements are met.
For Evan, that technical question comes second.
The first one is simpler:
How much of the laptop is actually being used for the business?
Want the tax rules behind the story?
Business Equipment: Can You Deduct the Full Cost?
A deeper look at computers and other equipment, mixed personal and business use, depreciation, §179, bonus depreciation, the de minimis safe harbor, and the records a small business should keep.
Next Episode
One More Client
A referral lands in Evan’s inbox.
The project is good.
The timing isn’t.