Guide for Self-Employed Professionals
Supplies vs. Equipment vs. Depreciation: A Decision Guide (2026)
You bought something for your business. Do you expense it this year or depreciate it over time? The answer depends on the price tag, and the rules are more generous than most people realize.
Key Takeaways
- Business purchases of $2,500 or less per item can be fully expensed in the year of purchase using the de minimis safe harbor, reported on Line 22 (Supplies).
- Section 179 allows full deduction in year one for purchases over $2,500 (up to $1,250,000 for 2026), but the deduction cannot exceed your taxable business income.
- The One Big Beautiful Bill Act (July 2025) permanently restored 100% bonus depreciation for qualifying property acquired after January 19, 2025, with no taxable income limitation.
- Line 13 is for depreciated or Section 179 assets (requiring Form 4562). Line 22 is for supplies and de minimis safe harbor items expensed directly.
This is one of the most common Schedule C questions: “I bought a laptop (or camera, or desk, or tool set) for my business. Where does it go on my taxes?”
The answer depends on how much it cost, and the good news is that the IRS gives you several ways to deduct business purchases in full the same year you buy them. You only need to spread the cost over multiple years (depreciate) if you choose to, or in a few narrow situations.
Here's the decision tree, from simplest to most complex.
The Decision Tree: Expense It or Depreciate It?
When you buy something tangible for your business, you have three main paths. The right one depends on the cost per item.
Path 1: Cost is $2,500 or less per item
Use the de minimis safe harbor election. Expense the full cost in the year you bought it. Report it on Schedule C, Line 22 (Supplies) or the appropriate expense line. No depreciation needed.
Path 2: Cost is over $2,500
You can still deduct the full cost in year one using Section 179 or 100% bonus depreciation (reinstated by the OBBBA). These go on Schedule C, Line 13 (Depreciation) with Form 4562.
Path 3: Spread the cost over multiple years (MACRS)
Sometimes you might want (or need) to depreciate an asset over its recovery period. This is less common for sole proprietors, but it makes sense in specific situations. Also reported on Line 13 with Form 4562.
Let's walk through each path in detail.
Path 1: The De Minimis Safe Harbor ($2,500 or Less)
The de minimis safe harbor is the simplest way to handle business purchases. If an item costs $2,500 or less per item or per invoice, you can deduct the entire cost as an expense in the year you bought it. No depreciation, no Form 4562, no multi-year tracking.
How it works.
The $2,500 threshold applies per item or per invoice (if you don't itemize on the invoice). So a $2,400 printer is one item under the threshold. But be careful: if you buy that printer and the invoice also includes $200 of installation fees, the total invoice is $2,600, and the safe harbor wouldn't apply unless those items are separated.
The $5,000 threshold.
If you have an applicable financial statement (AFS), such as an audited financial statement, the threshold goes up to $5,000 per item. Most sole proprietors don't have an AFS, so the $2,500 limit is the one that typically applies.
How to make the election.
You elect the de minimis safe harbor by attaching a statement to your tax return for that year. The election applies to all qualifying purchases for the entire year. You can't pick and choose which items to apply it to. Most tax software handles this statement automatically if you indicate you're using the safe harbor.
Where it goes on Schedule C.
Items expensed under the de minimis safe harbor typically go on Line 22 (Supplies) or Line 27a (Other expenses) on Schedule C, depending on the nature of the purchase. A $1,200 desk goes on Line 22. A $900 software license might go on Line 18 (Office expense) or Line 27a.
Quick examples:
- •$800 laser printer for your home office: expense it.
- •$2,200 camera for your photography side business: expense it.
- •$2,499 standing desk: expense it.
- •$350 in power tools for your contracting work: expense it.
Path 2a: Section 179 (Deduct the Full Cost in Year One)
When a purchase exceeds $2,500, Section 179 is usually the first option to consider. It lets you deduct the full cost of qualifying business equipment in the year you place it in service, rather than spreading it over several years.
2026 Section 179 limits
The maximum deduction for tax year 2026 is $1,250,000. This begins to phase out when your total qualifying equipment purchases exceed $3,130,000. For most self-employed people, these limits are far higher than you'll ever need.
What qualifies.
Most tangible personal property used in your business qualifies: computers, furniture, machinery, tools, equipment, and off-the-shelf software. The property can be new or used. It just has to be purchased (not leased) and placed in service during the tax year.
The taxable income limitation.
Here's the catch that trips people up: your Section 179 deduction cannot exceed your taxable business income for the year. If your Schedule C shows $8,000 of net income before the Section 179 deduction, you can only deduct $8,000 under Section 179, even if the asset cost $12,000. The unused portion carries forward to future years, so you don't lose it.
How to elect Section 179.
File Form 4562 (Depreciation and Amortization) with your tax return. The Section 179 deduction flows to Schedule C, Line 13. Most tax software walks you through this when you enter a business asset.
Business use percentage matters.
If you use an asset for both business and personal purposes, you can only deduct the business-use portion. A $3,000 laptop used 70% for business means you can deduct $2,100 under Section 179. You need to use the asset more than 50% for business to qualify for Section 179 at all.
Path 2b: 100% Bonus Depreciation (Restored by the OBBBA)
Bonus depreciation is another way to deduct the full cost of qualifying property in year one. Under the Tax Cuts and Jobs Act (TCJA), 100% bonus depreciation was phasing down: it dropped to 80% in 2023, 60% in 2024, 40% in 2025, and was heading to 20% in 2026.
The One Big Beautiful Bill Act (OBBBA), signed in July 2025, permanently restored 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025. The phase-down is gone.
How bonus depreciation differs from Section 179.
When to use bonus depreciation over Section 179.
The main advantage is the absence of an income limitation. If your business income is low or negative in the year you make a big purchase, bonus depreciation lets you take the full deduction anyway. The resulting loss can offset other income (like a spouse's W-2 wages) or carry forward.
The acquisition date matters.
To qualify for 100% under the OBBBA, the property must have been acquired after January 19, 2025. Property acquired under a binding written contract before that date is still subject to the old TCJA phase-down percentages.
Path 3: MACRS Depreciation (Spreading the Cost Over Time)
With Section 179 and 100% bonus depreciation available, why would anyone choose to spread the deduction over multiple years? There are a few situations where MACRS (Modified Accelerated Cost Recovery System) depreciation makes sense.
When MACRS might be the right choice.
Common MACRS recovery periods.
Under MACRS, every type of business property has an assigned “recovery period” (useful life for tax purposes):
| Recovery Period | Examples |
|---|---|
| 3 years | Small manufacturing tools, some software |
| 5 years | Computers, printers, copiers, vehicles, cameras, recording equipment |
| 7 years | Office furniture, desks, shelving, most equipment not assigned elsewhere |
| 15 years | Land improvements (fencing, parking lots, landscaping) |
| 27.5 / 39 years | Residential rental property / nonresidential buildings |
For most sole proprietors, MACRS is the fallback when Section 179 or bonus depreciation doesn't apply. It's not the wrong choice, but it's rarely the best one for small purchases.
Real-World Examples: What Goes Where
Let's put the decision tree into practice with purchases self-employed people actually make.
$800 printer for your home office
Under $2,500, so the de minimis safe harbor applies. Expense the full $800 on Schedule C, Line 22 (Supplies). Done.
$2,499 camera for a photography business
Still under $2,500. Use the de minimis safe harbor to expense the full amount. No depreciation paperwork, no Form 4562. If you bought a $300 lens on the same invoice, check whether the invoice total exceeds $2,500. If it does, you may need to itemize the purchases separately.
$3,500 MacBook Pro for freelance development
Over $2,500, so the de minimis safe harbor doesn't apply. Use Section 179 or bonus depreciation to deduct the full $3,500 in year one. It goes on Schedule C, Line 13 via Form 4562. If you use the laptop 80% for business, you deduct $2,800 (80% of $3,500).
$6,000 professional video setup (camera body + lenses + lighting)
If purchased as separate items, each under $2,500, each item qualifies for the de minimis safe harbor individually. A $1,800 camera body, $1,400 lens, and $800 lighting kit are three separate items, each under the threshold. If purchased on one invoice without itemization, the total exceeds $2,500 and you'd need Section 179 or bonus depreciation instead.
$15,000 work vehicle
Vehicles have special rules. Passenger vehicles (under 6,000 lbs) are subject to annual “luxury auto” depreciation caps that limit how much you can deduct each year, even with Section 179 or bonus depreciation. Heavy vehicles (over 6,000 lbs GVWR) have higher limits, and SUVs in this weight class have a separate Section 179 cap of $32,000 for 2026. Vehicles always require more than 50% business use. This is one area where working with a tax professional is worth it.
Schedule C: Line 13 vs. Line 22
A common source of confusion is knowing which line on Schedule C to use. Here's the straightforward breakdown.
Line 13: Depreciation and Section 179 expense deduction
Use this line for business assets with a useful life beyond one year that cost more than $2,500 (or any asset you choose to depreciate). This includes Section 179 deductions, bonus depreciation, and regular MACRS depreciation. You'll need to file Form 4562 along with your return.
Line 22: Supplies
Use this line for consumable items used in your business (packing materials, cleaning supplies, stationery) and for tangible items that cost $2,500 or less that you're expensing under the de minimis safe harbor. These are items you're choosing to treat as current expenses rather than capital assets.
The key distinction is simple. If you're filing Form 4562 for it, it goes on Line 13. If you're expensing it directly (supplies, de minimis safe harbor items), it goes on Line 22 or another appropriate expense line.
Common Mistakes to Avoid
Forgetting to account for personal use.
If you use your laptop 60% for business and 40% for personal use, you can only deduct 60% of the cost. This applies whether you're using the de minimis safe harbor, Section 179, or any other method. Document your business-use percentage and be realistic about it.
Bundling items to stay under $2,500.
You can't split a single asset across multiple invoices to stay under the de minimis threshold. A $4,000 computer is a $4,000 computer, even if you pay for it in two installments. However, genuinely separate items purchased together (a monitor, a keyboard, a mouse) can each be evaluated individually.
Not realizing Section 179 is limited by business income.
If your net business income is only $5,000, Section 179 can only offset $5,000. The unused portion carries forward, but if you need the full deduction this year, bonus depreciation (which has no income limitation) may be the better choice.
Depreciating items that could be expensed.
Some people (and some tax software by default) depreciate a $1,500 desk over seven years. That's technically allowed, but there's no reason to when the de minimis safe harbor lets you deduct it in full right away. Simpler is better.
Forgetting about depreciation recapture.
If you deducted an asset using Section 179 or bonus depreciation and later sell it or convert it to personal use, you may owe taxes on the “recaptured” depreciation. This doesn't mean you shouldn't take the deduction. Just be aware it exists, especially for higher-value assets you might sell later.
Quick Reference: Which Method to Use
| Situation | Method | Schedule C Line |
|---|---|---|
| Item costs $2,500 or less | De minimis safe harbor | Line 22 (Supplies) |
| Item costs over $2,500, you have enough business income | Section 179 | Line 13 (Depreciation) |
| Item costs over $2,500, low or negative business income | Bonus depreciation (100%) | Line 13 (Depreciation) |
| You want to spread deductions over several years | MACRS depreciation | Line 13 (Depreciation) |
| Business use is under 50% | ADS straight-line depreciation | Line 13 (Depreciation) |
The Bottom Line
Most business purchases are simpler than people think. If it cost $2,500 or less, expense it under the de minimis safe harbor and move on. If it cost more, Section 179 or bonus depreciation (now permanently at 100% under the OBBBA) will usually let you deduct the full amount in year one anyway. True multi-year MACRS depreciation is only necessary in specific situations.
The most important thing is getting the purchase on the right line of your Schedule C. Whether it's a $200 set of drill bits or a $5,000 workstation, the tax code gives self-employed people good options to deduct what they spend on their business.
Not sure which category your purchases fall into? Categorize My Expenses can sort your transactions into the correct Schedule C lines, distinguishing supplies from equipment so you know exactly what goes where at tax time.
Disclaimer: This article is for educational purposes only and does not constitute tax, legal, or financial advice. Tax rules change, and individual situations vary. The Section 179 limits and bonus depreciation rules referenced are based on current law as of early 2026, including changes from the OBBBA. Consult a qualified tax professional for advice specific to your situation. Categorize My Expenses is a financial data organization tool. It is not a tax preparer and does not provide tax advice.
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