Listed Property
Listed property is a term used to describe any items that are generally used for entertainment or recreation, but which may be used for business as well, such as computers, cell phones, cars, and video cameras.
If the listed property is used 100% for business, then you may be able to deduct the entire purchase of the item the year it is put into use. If the purchased item is used more than 50% for business, then you may claim a section 179 deduction or an accelerated depreciation deduction. If the business use does not exceed 50%, you may only claim ADS straight-line depreciation. For more information on ADS, see chapter 4 in IRS Publication 946.
If you use listed property in your business, you must file Form 4562 in order to claim a depreciation or section 179 deduction. However, in order to claim the depreciation or deduction, you must be prepared to prove that you do indeed use the listed property more than 50% for business. To do this, it will be necessary to keep a log of usage or something similar. For example, if you want to claim a 179 deduction on a computer which you use more than 50% for business, you will need to keep a log showing both business and non-business uses.
For more information on keeping adequate records, see chapter 5 of IRS Publication 946 under "What Records Must Be Kept?".
You can also depreciate or take a section 179 deduction for property bought specifically for business use, and for personal property that has been converted to business use. However, different rules apply, so refer to IRS Publication 946 for more information.
Where To Deduct
You will deduct expenses for the business use of your home on Form 1040. Because you are considered self-employed, you will need to attach Form 8829, as well as Schedule C (Form 1040) to your return.
Example
Example of Completed Forms
Here is an example of completed versions of Schedule C (Form 1040), Form 4562, and Form 8829. You will need information from these completed forms to file your income taxes and complete your 1040. Most of you will not need to complete Form 1040-ES, Estimated Tax for Individuals, unless you expect to pay more than $1,000 in total taxes for income not subject to withholding, but it is included below nonetheless.
Useful Forms and Publications:
Additional forms can be downloaded from the IRS website at: http://www.irs.gov/formspubs/index.html.