By: A.J. Cook

To improve your job performance, you bought yourself a home computer for Christmas. Can you deduct it?

As with just about every taxing question, the answer is maybe. Reviewing rulings and cases gives us some idea of the answer. The Internal Revenue Service refused to allow a teacher to deduct the home computer she used to evaluate students. The school required computerized evaluations. The IRS said she could use the equipment furnished at school.

A university hired a person to apply for grants. The documentation required long hours, so she bought a computer to speed the process. Even though the computer benefited the university, the deduction was disallowed. The IRS said the school didn't require her to buy it.

Similarly, a salesman didn't get a deduction even though his employer wanted the sales force to analyze insurance plans with computers. The IRS said the company didn't penalize those without them.

The IRS struck again. An aerospace engineer bought a computer to avoid long lines at the one at his office. His employer even wrote a letter saying the company conditioned his employment on the purchase. The IRS said the engineer could do his job without it. The agency added that the self-serving letter from the employer didn't convince the IRS otherwise.

If the engineer had gone to court, he might have won. The agency's over-conservative attitude stems from concern for potential abuse inherent in an employee's personal use of computers at home. The courts are more user friendly.

A professor's psychology research project required massive amounts of data. Because the university had no computer, he bought one to use at home. The IRS disallowed the deduction. The court rebooted the deduction and ruled for the professor. Taxpayers need not prove job performance is impossible without a computer, the court said. It is enough to show work would be significantly benefited.

The Planning Tip: If your home computer meets all of the following tests, deduct it:

• It is necessary for proper job performance.
  
• Your employer virtually requires it.
  
• It is for the employer's convenience, not yours.
  

Even if a computer meets the tests, employees can deduct it only to the extent the deduction plus other miscellaneous expenses exceed 2 percent of adjusted gross income. With a $50,000 adjusted gross income, you deduct only the amount in excess of $1,000.

A.J. Cook is a lawyer and CPA. His tax column appears weekly in numerous newspapers. Why isn't it published in your hometown newspaper? Ask its Business Editor to subscribe.

Copyright © 1987-2001 A.J. Cook All Rights Reserved
This information is not intended for use without professional advise.
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Released 2-12-96