- 1). Establish a record-keeping process for computer use if the computer is not exclusively used for business purposes. If you use the computer for business and personal use, you will only be able to deduct the percentage of use that qualifies as business use. The record can be a simple logbook or spreadsheet that tracks the date and time of use, and the nature of the use, personal or business. If the use is business-based, specify the specific business function that you performed, such as "entered invoices."
- 2). Keep an accurate record of the cost of any computer equipment that has any business use. Save your receipts, and keep a computer equipment log if you have multiple computers. In the log, record the cost of the machine and a brief description. Include the serial number and the location where it is used, or the normal assigned user. Also note the date that the equipment was placed in service.
- 3). Calculate the amount of business and personal use of each computer and equipment at the end of the year. Add up the hours of each type of use---business and personal---in quarter-hour increments. Divide the business use hours by the total of all hours the equipment was used to arrive at a percentage of business use.
- 4). Complete the depreciation forms for your federal income tax, typically Form 4562, using all of the information that you have recorded. Computers are generally considered five-year property for depreciation. Transfer the final amount from all of your Forms 4562 to your Schedule C.
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