Is sales tax paid on a capital asset form 4562 or line 23?

Line 23 takes sales tax you collected as the seller when it is in your gross receipts, and excludes sales tax you paid as the buyer of business property.

Is sales tax paid on a capital asset form 4562 or line 22?

Sales tax on supplies and other items you deduct currently simply rides along in that deducted cost, while sales tax on a capital asset goes into basis.

Where does sales tax on new equipment go? Form 4562

Short answer Form 4562 Form 4562, carried to Schedule C line 13

Sales tax paid on a capital asset belongs on Form 4562, form 4562, carried to schedule c line 13.

Why form 4562

Sales tax you pay as the buyer on property you will use in the business is treated as part of the cost of that property, not as a tax deduction on line 23. So it joins the asset's basis on Form 4562 and is recovered the same way the rest of the purchase price is, through depreciation or a section 179 election reported on line 13. The line 23 instructions exclude it in terms. The practical effect is often the same in year one if you expense the asset fully, but the entry belongs with the asset.

Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so sales tax paid on a capital asset lands on Line 4562 without you sorting it.

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What sales tax paid on a capital asset is confused with

Line 23, taxes and licenses: Line 23 takes sales tax you collected as the seller when it is in your gross receipts, and excludes sales tax you paid as the buyer of business property.
Line 22, supplies: Sales tax on supplies and other items you deduct currently simply rides along in that deducted cost, while sales tax on a capital asset goes into basis.
Line 13, depreciation and section 179 expense deduction: The tax is never its own expense line: it increases the asset's cost, and only the depreciation or section 179 amount reaches line 13.

Examples that belong on form 4562

$420 of sales tax on a $5,000 machine, giving $5,420 of basis
$96 of sales tax on a $1,200 laptop, giving $1,296 of basis
$1,750 of sales tax on a $25,000 work van, added to the vehicle's basis
$38 of sales tax on a $480 tool expensed under the de minimis safe harbour, deducted with the tool
$310 of sales tax on $3,900 of shop fixtures, capitalised with them

What does not belong here

A line 23 deduction for sales tax you paid on equipment.
Sales tax split out as its own Part V entry on line 27a.
Sales tax on a personal purchase.
Sales tax you collected from customers, which has its own rule on line 23.

The limit that applies

Freight, delivery, installation and sales tax all become part of a capital asset's basis and are recovered with it rather than deducted separately.

What to keep

Keep the purchase invoice showing the tax as a separate line, and record the total including tax as the asset's cost in your fixed asset list. Delivery and installation charges are added the same way.

Other expenses on form 4562

Expense	Line
a new roof on a business building	Form 4562
a used machine bought second hand	Form 4562
a website build	Form 4562
a work van or truck	Form 4562
buying a business vehicle	Form 4562
expensing or capitalising a purchase	Form 4562
improvements to a rented studio	Form 4562
legal fees to buy property or defend title	Form 4562
workshop machinery such as a 3D printer	Form 4562

Related lookups

Sources

This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.

Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.

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