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Determine the current value and tax write-off schedule for your computer hardware.
Computers and peripheral equipment are qualified technological equipment.
For most businesses, the strategic question is not how to depreciate computer equipment but whether to skip depreciation entirely using Section 179. Under current law, businesses can expense the full cost of qualifying computers, servers, and peripherals in the year they are placed in service — up to $2,500,000 (2025 limit after the OBBBA). A startup equipping its first office with $30,000 in workstations, monitors, and networking gear can deduct the entire amount in year one rather than spreading it across five years. The one binding constraint: Section 179 cannot create a net operating loss, so the deduction is limited to the business's taxable income for the year.
When Section 179 is exhausted or the income limitation kicks in, bonus depreciation (currently 100% after the OBBBA restored it) covers the remainder with no dollar cap and no income requirement. The practical result is that virtually any computer equipment purchase can be fully expensed in year one under current 2025–2026 law.
Servers, storage arrays, and networking switches fall under the same MACRS 5-year class as desktop computers. However, enterprise-grade equipment — a rack of Dell PowerEdge servers at $15,000 per unit, for example — often involves enough dollars to make the capitalization versus expensing decision strategically important. Data center operators who deploy large capital expenditures may prefer spreading deductions to smooth taxable income across years, particularly when they anticipate higher future income. Conversely, startups burning through capital often want every deduction in year one to offset initial revenue.
Cloud computing services (AWS, Azure, GCP) are operating expenses, not capital assets — no depreciation is involved. Only physical hardware that the business owns qualifies for the MACRS depreciation schedule or Section 179 expensing.
For IRS purposes, a desktop tower and a laptop computer are treated completely identically: both are MACRS 5-year property, both qualify for Section 179 and bonus depreciation on equal footing, and both were removed from the listed property category by the Tax Cuts and Jobs Act in 2018. Before 2018, all computers required detailed usage logs proving over 50% business use. That requirement is gone — a significant administrative relief for small businesses.
In the resale market, however, the two diverge meaningfully. Desktops hold their practical utility longer because individual components — RAM, storage, GPU — can be upgraded at modest cost. Laptops depreciate in market value faster due to battery wear, thermal throttling over time, and the inability to upgrade most components. A 4-year-old desktop workstation may still serve a business productively; a 4-year-old laptop often cannot. This gap between tax book value and real-world market value is an important consideration when planning asset replacement cycles.
Although the Tax Cuts and Jobs Act removed computers from the listed property category, good recordkeeping remains essential. The IRS still expects you to document that equipment is used for business, especially in an audit. Keep purchase invoices, deployment records, and any asset management system exports. For home-office computers used partly for personal activities, document the business-use percentage — only that fraction of the cost is deductible. If you claim 100% business use on equipment that also serves personal needs, you are taking an audit risk without documentation.