🧾 Asset Capitalization Guide

We review your business transactions to make sure all income and expenses are recorded accurately.

When you purchase an item—or a group of related items—costing $2,500 or more, we’ll reach out with a quick task asking for a few details.

Sometimes, we’ll also request a copy of your receipt or invoice to record the purchase correctly as an asset in your books.

💰 What the IRS Requires

According to the IRS, any property you buy for your business that:

• Costs $2,500 or more, and
• Has a useful life of more than one year, must be capitalized.

This means you can’t deduct the full cost right away.

Instead, the cost is spread over several years through depreciation—reflecting how the asset is used over time.

(A few exceptions exist, such as certain computer software or qualified real property.)

Capitalizing assets helps keep your financial statements accurate by matching the asset’s cost to the revenue it helps generate.

🧮 How Depreciation Works

Depreciation is how we expense the cost of long-term assets over time.

Each year, part of the asset’s value is recorded as a depreciation expense.

You’ll see this reflected in two places:

• On your Balance Sheet: as Accumulated Depreciation
• On your Profit & Loss Statement: as Depreciation Expense