In an earlier post, I reviewed some of the basics around fixed assets, focusing primarily on purchased tangible property. This is a deeper dive into repairs and maintenance expenses versus capital improvements for businesses that own real property.

Fixed assets can cause confusion for many self-employed professionals and small businesses. Fixed assets are tangible property that have a useful life of more than one year which are used in business operations to generate revenues. For large businesses, the fixed assets will often be categorized as property, plant, and equipment (PP&E) on the balance sheet. For many non-accountants, that definition and those broad categories do not help determine which purchased item should be classified as fixed assets. Here are some additional criteria to help small businesses and their bookkeepers properly classify fixed assets. (Note that commercial buildings and rental property will be covered in another post.)

I am working with a professional who recently transitioned from full-time employment to self-employment in a solo practice. We were recently calculating his year-to-date income and projecting his total income for the year in order to determine what he should make for estimated tax payments (more about self-employment and estimated taxes). Many of his questions reminded me that cash-basis accounting has some nuances worth reviewing for those start-up professionals tracking their own financials.

Throughout my tax career, I have been asked questions regularly around vehicle expenses. Automobile expenses for tax purposes can be confusing to many business owners. Understanding some of the basic concepts around vehicle deductions can reduce uncertainty and help with tax planning for business taxpayers.