Karl Townsend wrote:

...


That means that it is tax deductible and you can deduct it from your
taxes.


Possibly.



..... Your reported net income is zero.


Most probably not. Usually, for a business, the first purchase of an
item must be depreciated over the probable working life of the item and


Depreciation does not change the fact that the item is written off, it
only changes the timing of the writeoff.



...

You're forgetting my personal favorite tax rule, Section 179. This allows
you to expense up to the first $20,000 in capital equipment the year of
purchase. This one allows you to "balance" your income right at year end.
Got a good year? Take 179 to the max. Bad year? Depreciate and have
deduction next year.

For business/self employed taxes ain't no joke. You pay 15% to uncle as
income, another 15% as self employment, then 8% to the state. If you had a
real good year, pay another 10% to Uncle and another 3% to state. That's 1/2
your income in taxes! Now should I buy another shop machine and expense it,
or send it all in to Uncle???


Don't forget that home office deduction! That is worth a MINT! It
drastically
reduces my taxes every year I make significant money. A home shop is
certainly
deductable if you run a business out of it.

Jon