Gary is right. Depending on the size of the purchase, you can depreciate the amount; usually over three years. There are various depreciation methods (eg. straight-line, sum of the years didgets, accelerated, etc.).

The depreciation legality really has nothing to do with the financing scheme, except that you can depreciate the TOTAL cost, including interest.

You can depreciate a piano over thrre years, for instance, even though it takes you five years to pay for it.

Of course, once you depreciate an asset, you have to pay capital gains tax when you sell it. The tax is on the difference between the book value of the asset after it is depreciated and the sale price. That's a major consideration for me with the guitars in my collection, which all are eventually are depreciated to zero.

Working musicians need to be familiar with the tax laws that apply to the way you've set-up your business (Proprietorship, Incorporation, LLC, etc.).

Turbo Tax is good, but, in my mind, at least, if you're generating significant revenue, a CPA is better.


Russ