Is an iPad or other tablet computer deductible as a business expense? As with many tax issues, it depends. You can only deduct the costs associated with business use. If you never use the tablet for personal reasons, you're fine. Otherwise, you'll have some record-keeping and calculations to deal with.
- You can expense 100% of your iPad under Section 179 and bonus depreciation rules.
- To qualify for a Section 179 deduction, you'll need to meet a few criteria; namely, you have to use the iPad for business purposes at least 50% of the time.
- If you don't want to expense your iPad under Section 179, you can use the bonus depreciation method.
- Bonus depreciation is at 100% through 2022, and will drop by 20% every year through 2027.
Rules for Deducting iPads
It used to be that you couldn't deduct the entire cost of your tablet in the first year, and you had to have a business net income that exceeded the cost of the tablet. You had to use the tablet for business purposes more than 50% of the time. You could expense the tablet under IRS Code Section 179 or use depreciation to break down the cost deduction over several years.
You can now expense your tablet even if you use it for business purposes less than 50% of the time. You also have the option to depreciate the expense over several years using the MACRS depreciation method.
It used to be that you could deduct business usage of your tablet as an employee if you claimed it as an unreimbursed employee business expense. This changed with the passage of the Tax Cuts and Jobs Act. This itemized deduction is no longer available to taxpayers. You can only claim work-related costs as a tax deduction if you're self-employed.
iPads Are Not Listed Property
The IRS has a special category for equipment that businesses purchase and use but which can also be used personally. It might be a little difficult to use a machine at home, but a car or a computer can easily do double duty as a personal expense. This category of items is called listed property—an asset that lends itself to personal use.
The Tax Cut and Jobs Act removed computer devices and peripherals (like printers) from the listed-property category, as long as your iPad, in this case, was put into service after Sept. 27, 2017. That change only means that the recordkeeping requirements are a little less difficult. But you still can't take a deduction for the personal use of tablets and other computing devices.
If you don't use your iPad only at your place of business (home office, for example), then it's considered listed property.
How To Deduct Your iPad
To get a Section 179 deduction, you need to use your iPad for business purposes at least 50% of the time, as long as you didn't acquire it from a relative. If the iPad meets the criteria, then you can use Part I of Form 4562 to expense the full amount you paid for the tablet.
If you use it less than 50% of the time for business in the first year in service, you can expense the entire purchase price under the current bonus depreciation rules or deprectiate the cost of the device over time.
The 100% bonus depreciation rule now in place will end in 2022 and drop down by increments of 20% through 2027.
According to the IRS, a deductible business expense must also be both "ordinary and necessary." An ordinary expense is "common and expected in your trade or business." An expense is considered necessary when it's "helpful and appropriate for your trade or business."
So, the question becomes whether most people in your business need the use of an iPad and if your iPad helps you run your business. You can claim a deduction for the portion of the time you use it for business if your answer is yes. Otherwise, you're out of luck...even if you do use it for business purposes.
How To Document Your iPad Usage
The best method to determine your personal and business use of your iPad is to keep a log of the time you use the asset for business versus the time you spend using it personally. Allocate your overall monthly expenses by this percentage.
Begin keeping a log of business activity as soon as you open your iPad and start using it. Use a simple spreadsheet—they're available for both iPad and mobile use—and regularly record your hours spent on it for business use and the business activity you were conducting
Don't overcomplicate your usage tracking. Consider it like recording time spent on any activity. Getting in the habit of doing this will pay big dividends if you're ever audited.
You can take a few other precautions as well. Don't put games on your iPad if you're using it for business. Make sure you're able to show just how you used it for business. For example, you might be able to get the deduction if you can show that you only use the iPad when you travel for business and that it's the only computer you take on business trips.
Frequently Asked Questions (FAQs)
Is a tablet a business expense?
If you can prove that you use your tablet for your business and meet certain other requirements, then there's a good chance you can expense the tablet.
Can I deduct an iPad as a business expense?
Yes. However, you'll need to meet certain requirements to be able to deduct it. Also, you have the choice of deducting the entire cost of a qualifying iPad, or depreciating it over several years.