Black Friday is often seen as a great time to pick up some holiday gifts or new goodies for your house. But, savvy self-employed workers and small business owners can use Black Friday sales to buy equipment for their business and then deduct the cost at tax time.
Why should I care about less expensive business equipment?
Some of you might be thinking that the price of your business expenses might not matter because you can write it off anyways. You’re right on the second part. The IRS allows you to deduct the cost of virtually any expense related to your business as long as it’s ordinary and necessary.
But remember that a tax deduction only helps you when you’re filing your tax return. You still have to shell out the money upfront for your equipment. Those dollars can quickly add up. We don’t advise buying anything simply for a tax deduction: If your business doesn’t need the equipment, don’t buy it.
Black Friday is generally aimed at consumers, so don’t expect any deals on rent, advertisement or other business-specific costs. But there are two major categories of sales that could be useful for your business: cars and computers.
How to deduct a work computer
Nearly any electronics retailer will have major sales on computers, including the latest Surface computers. You can also expect some sales on Apple computers but, historically, those discounts aren’t that large. If you use your computer for business more than 50 percent of the time, you can deduct the entire cost. This is thanks to Section 179, which also covers machinery, furniture and more.
You are supposed to keep a log of your business activity, even if you use your computer 100 percent for business. One exception to this is if you use a computer only for business and keep it at your work location. For example, if you leave your computer for your real estate business in your qualifying home office, you don’t need a business activity log.
Black Friday for self employed: Business cars
Some vendors are discounting cars up to $10,000 off the list price for Black Friday. If you wind up buying a personal vehicle that will be used for business purposes, be sure to get the deductions you’re entitled to. If you use a personal vehicle for work purposes, you can deduct the wear-and-tear on your vehicle. You can use the standard mileage rate or the actual expense method.
The standard mileage rate is easier because you only have to keep track of your mileage and then multiply your business mileage by the standard mileage rate (58 cents in 2019). The actual expense method lets you deduct the actual costs of using your car for work but this involves keeping detailed records of all the costs you incur for your car.
Don’t write-off your work clothes
Black Friday can also be a good time to spiff up your wardrobe for work. But, you likely won’t be able to write-off those costs as business expenses. The IRS will let you write-off business clothes but only if it’s:
- Required or essential to employment
- Not suitable for general or personal wear
- Not worn for general or personal wear.
If there’s a Black Friday sale for a hazmat suit or scrubs, you can buy them and deduct it as a business expense. But you cannot write-off other types of clothes.
MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.