Are Tools an Expense on Income Tax?

If tools are just for a hobby, they aren't deductible.

If tools are just for a hobby, they aren't deductible.

If you have to buy tools for work, they're a legitimate tax deduction. This applies whether you buy them for your own business, or because your employer makes you pay for your own equipment. You may not be able to deduct the entire cost of the tools in the year you buy them, however.


If you're self-employed in a profession that requires tools, buying those tools is a business expense. If you expect the tool to wear out within a year of purchase, you can write off the entire cost. In theory, tools with a longer useful life have to be depreciated over time. In practice, most tools qualify for the Section 179 deduction, a provision of the tax code which allows you to write off the entire cost at once in the year you made the purchase. You report the deduction on Schedule C for self-employment income.

Employee Expense

If you buy tools as an employee, you likewise deduct or depreciate the expense depending how long the tool lasts. You have to subtract any reimbursement you get from the company first. Claiming the deduction is harder for employees, however. You have to claim the cost on Schedule A, which requires itemizing instead of taking the standard deduction. Employee expenses are a "2 percent deduction": to claim them, you add up all such deductions, subtract 2 percent of your adjusted gross income and write off whatever remains.


If you rent out property, you can write off the costs of maintaining it in livable condition. Maintenance equipment and tools are an exception: if you buy them to do repairs yourself, you have to depreciate them, not deduct them. When you rent or lease the tools from someone else, you can deduct the entire rental payment, unless it's a lease-to-own contract. You report rental expenses and income on Schedule E, unless you're a full real-estate professional. In that case, you use Schedule C.

Personal Use

It's perfectly legal to use the same set of tools for work and personal activity, but it affects your deduction. If 20 percent of the time you use your car-repair tools you are working on your own vehicle, you can deduct only 80 percent of the price. When the business use is less than 50 percent, you can't claim the Section 179 write-off. If the IRS classes your business as a hobby instead -- for example, if you never show a profit -- you have to itemize to deduct business expenses.


About the Author

A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.

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