Gary, capital limits on my equipment purchases and depreciation are always a concern. I try to purchase the maximum number of collectible guitars my playing income will justify and depreciate them over three years.

The individual has some flexibility about whether to treat a purchase as an asset subject to depreciation or as a straight cost of doing business...like, say a power adapter. A little common sense is in order, to be safe. The rule is, if it is used as an income generating asset and has a useful life of over one year, it can be depreciated over the life of the asset.

A keyboard generally has a life of more than one year. I'd be really careful about treating the purchase of one used to generate income as anything but a depreciating asset. And, I'm careful to be realistic about the length of time I choose to take the depreciation. Plus, when the depreciated asset is sold, you have to pay capital gains on the difference between the "book" or depreciated value of the asset and the sale price.

I just called an associate...an attorney who worked for the IRS and who is now the area's top tax attorney and outlined the issue we're talking about. He confirmed that, during an audit, the question of useful life is what determines how an expense/depreciation decision is made. He also asked about the purchase price of the keyboard and the general annual income of a player. When I gave him my estimate, he said that those numbers would raise some flags if treated as an ordinary expense item and charged off in one year.

I depreciate ALL equipment purchases over $500.00 with a useful life of over one year.

For me, that's both the sound business decision and the right to do from an ethical standpoint. I'll take EVERY deduction I feel is legal, but that's where it stops.


Russ