If you have a large number of assets, keeping track of the accumulated depreciation associated with specific assets is a good idea. You can do this either outside QuickBooks (such as in a Microsoft Excel spreadsheet or with your tax return) or inside QuickBooks (by using individual accounts for each asset’s original cost and accumulated depreciation).
After you set up these two accounts, you can record the asset depreciation with a journal entry such as the following one, which records $500 of depreciation expense:| Debit | Credit | |
| Depreciation expense | $500 | |
| Accumulated depreciation | $500 |
In recent years, federal tax laws have provided three simplifying tricks for handling fixed assets and fixed assets depreciation — an explicit $2,500 capitalization limit amount, bonus depreciation, and Section 179 depreciation — that together enable you to immediately write off or depreciate the entire cost or most of the cost of many assets. These tricks are big breaks for small businesses.
The explicit capitalization limit, for example, which comes from new tangible property regulations that the IRS issued in late 2015, says you can immediately deduct as supplies expense anything that costs less than $2,500. (Just to be extreme, if you purchase ten $2,400 tablet computers, you could write off this purchase as $24,000 of supplies expense.)Section 179 depreciation lets you immediately expense, or write off, up to $500,000 of fixed assets as long as you use the assets more than 50 percent for your business and as long as you have profits. For 2016, 2017, 2018, and 2019, bonus depreciation lets you (after taking into account Section 179 depreciation) immediately expense or write off 50 percent of whatever is left.
In any case, these immediate-expensing and -depreciation loopholes can save you tons on taxes. They also mean that you may be able to simplify your fixed assets accounting too by simply calling many of the low-value items you tracked in the past for tax purposes “supplies expenses.”
