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Do business expenses have to be accounted for in same tax year that they were incurred in?


ex: I bought a cpu in 2005, now it is used solely for my business which i started in 2006, can I claim it as a business expence for the 2006 tax year?

It does not matter when you purchased it. You converted it from personal use to business use in 2006. Therefore, when deducting it as a business expense, you can only deduct it's fair market value at the time you converted it to business use, which had better be less than what you paid for it (since CPUs go down in price rather quickly). Be ready to prove the deduction in case IRS decides to check you out.

As mentioned above, you can use Section 179. All in all, unless you plan to hire a taxman, you should get acquainted with the IRS website and relevant publications. Source(s): http://www.irs.gov/pub/irs-pdf/p334.pdf...
http://www.irs.gov/pub/irs-pdf/p583.pdf...
http://www.irs.gov/pub/irs-pdf/p535.pdf...
The expense does have to be in the same tax year, but check with a CPA about depreciation expense as a write off.
YES
The computer must be capitalized and depreciated over 5 years using MACRS depreciation rates. Starting when it was placed in service (when it was first used). If you had taxable income in 2005 and began using it, you can expense the entire cost under Sec 179, which allows immediate expensing of $105,000 if your total acquisitions are under a certain threshold.
IRC
usually yes
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