Glossary
What is Depreciation (Section 179)?
Definition
Depreciation is the process of deducting the cost of a business asset (computers, cameras, furniture, vehicles) over multiple years rather than all at once. The IRS assigns useful lives (5 years for computer equipment, 7 for office furniture, etc.) and you deduct a portion each year.
Section 179 is the alternative: deduct the full cost in the year of purchase, up to $1.16M in 2024. For most freelancer equipment purchases, Section 179 is the better choice.
Why it matters
- A $2,500 laptop bought on December 15 gives you a $2,500 deduction this year under Section 179 — worth ~$920 at a combined 37% freelancer rate.
- Depreciation spreads the same $2,500 over 5 years ($500/yr), useful only if you want to smooth deductions across a low-income year and a high-income future year.
- Some assets (vehicles, real estate) have separate depreciation rules; Section 179 doesn't apply cleanly to them.
Best practices for Depreciation
Use Section 179 for most equipment
Unless you're in a loss year or expect much higher income next year, immediate expensing beats depreciation. Report on Form 4562.
Mind the business-use percentage
Equipment used partly for personal reasons (a laptop you also use for Netflix) gets prorated deductions. Document business-use percentage annually.
Know the vehicle rules
Vehicles over 6,000 lbs GVWR have special Section 179 rules; passenger cars have tight annual caps. Most freelancer passenger vehicles should use standard mileage, not depreciation.
FAQ
Can I Section 179 my phone?
Yes, if used primarily for business. If split with personal use, prorate the deduction by business-use percentage.
What happens if I sell the equipment later?
If you took Section 179 or depreciation, part of the sale proceeds can be 'recaptured' as ordinary income. This is usually not a big deal for freelancers but matters for expensive equipment.
Ready for clean equipment records?
Hustlay tracks equipment purchases with date, cost, and business-use %, so your Section 179 + Form 4562 work is a 5-minute export at tax time.