Editorial · December 11, 2024
Fixed Asset Register: How to Track Business Equipment
A fixed asset register is a simple list of the equipment and other long-lived items your business owns. Each line shows what the item is, what it cost, when you started using it, and where it sits today. Small firms often skip this list until a tax return, a loan or a lost laptop forces the issue. A short, tidy register costs little to keep and saves real time later.
What goes in a fixed asset register
Record items you expect to use for more than one year. Think of computers, machines, vehicles, tools, furniture and shop fixtures. Skip things you use up fast, like paper or cleaning supplies.
The IRS explains the same idea for tax. In its guide to depreciation, property can only be depreciated if it wears out, gets used up, becomes obsolete or loses value from natural causes, and if its useful life runs well past the year you start using it. Land does not qualify, because land does not wear out.
Source: IRS Publication 946 (2023), How To Depreciate Property, irs.gov.
The columns to start with
A spreadsheet is enough. Give every item one row and keep these columns.
- Asset ID: a short number you also write on a tag stuck to the item.
- Description: make, model and serial number.
- Purchase date and the date you first put it to use.
- Cost: the price plus delivery and setup, as shown on the invoice.
- Location and the person who looks after it.
- Depreciation method and expected life, once your tax preparer has chosen them.
- Status: in use, repaired, sold, lost or scrapped.
Keep the invoice for each item in a folder with the same asset ID. If an auditor, lender or insurer asks, you can answer in minutes.
Which purchases to list and which to expense
Not every small buy needs a row. The IRS offers a de minimis safe harbor. If you choose it, you can deduct items at or under $2,500 per invoice or per item right away instead of listing them as assets. The $2,500 level has applied since tax years beginning in 2016 for businesses without audited financial statements. The rule sits in Treasury Regulation 1.263(a)-1(f).
Two cautions help here. You make the choice each year with your return, so talk to your tax preparer first. And you may still want to track pricey or easy-to-steal items, such as laptops and phones, on a separate low-cost list, even if you deduct them at once.
Source: IRS, Tangible Property Final Regulations, irs.gov, which covers Notice 2015-82 and the $2,500 threshold.
How the register ties to depreciation
Depreciation spreads the cost of an asset over the years it helps earn income. The register gives your tax preparer the facts needed to work that out: cost, the date placed in service, and the type of property. Those same details feed IRS Form 4562, the form used to claim depreciation.
The register also shows when depreciation should stop. IRS Publication 946 explains that depreciation ends when you have fully recovered the cost, or when you retire the item from service. If a machine was sold in March but still sits on your list, you may keep claiming a deduction you should not. Update the status column the day something leaves the building.
Source: IRS Publication 946 (2023), irs.gov.
Do a yearly physical check
Once a year, walk the premises with the list in hand. Match each tag to its row. Mark what you find as present, moved, damaged or missing.
- Print the register, sorted by location.
- Check every item by its tag and serial number.
- Note anything on the floor that is not on the list, and add it.
- Note anything on the list that you cannot find, and ask who last used it.
- Fix the register, sign and date the count, and file it with your year-end records.
Pick a quiet week, such as the end of December, so the count matches your books. A second person should do the count if you can spare one. Fresh eyes catch errors that the person who keeps the list will miss.
Keep it simple and keep it current
The best register is the one you actually update. Add a row when you buy, change a row when you move or repair, and close a row when you sell or scrap. Back up the file with the rest of your records. A few minutes each month beats a weekend of cleanup every spring.
This article is general information, not tax advice. Rules and limits change, so confirm your numbers with a qualified tax preparer before you file.
Sources: IRS Publication 946 (2023), How To Depreciate Property; IRS, Tangible Property Final Regulations; Treasury Regulation 1.263(a)-1(f).