Are Security Cameras Tax Deductible?

Security cameras are common in many settings. A frequent question is whether their cost is tax deductible. The ability to deduct the cost depends significantly on their use. Tax laws differentiate between personal, business, and rental property use, each with distinct rules for what qualifies as a deductible expense. Understanding these distinctions is important for taxpayers seeking potential tax benefits.

Personal Use Security Cameras

Security cameras purchased solely for personal use, such as monitoring a private residence or property not used for business, are generally not tax deductible. The Internal Revenue Service (IRS) categorizes general home security as a personal expense. Personal expenses are not eligible for tax deductions, as they do not relate to income-generating activities.

There are limited exceptions where a security camera might partially qualify as a medical expense. For instance, if a camera is an integral part of a medically necessary home improvement, such as monitoring a specific medical condition as prescribed by a doctor, it could be included as a medical expense. However, only the amount of the improvement exceeding any increase in the home’s value, and surpassing a certain percentage of your adjusted gross income (AGI) if itemizing deductions, may be deductible. If a security camera is directly attributable to a qualified home office, a portion of its cost might be deductible, provided the home office is used exclusively for business.

Business and Rental Property Security Cameras

For businesses and rental property owners, security cameras are often legitimate expenses, making their costs potentially deductible. These cameras are assets that support business operations, such as protecting inventory, ensuring employee safety, or monitoring common areas in a rental property. The IRS requires any business expense to be “ordinary and necessary,” meaning it is common and accepted in the industry, and helpful and appropriate for the business.

The cost of security cameras can be handled in two primary ways: direct expensing or depreciation. For smaller purchases, businesses may expense the full cost in the year of purchase using the de minimis safe harbor election. This election allows taxpayers without an Applicable Financial Statement (AFS) to expense items costing $2,500 or less per invoice or item, while those with an AFS can expense items up to $5,000 per invoice or item. This approach provides an immediate deduction rather than spreading the cost over several years.

Alternatively, the cost of security cameras, particularly more significant investments, is subject to depreciation. Depreciation allows businesses to recover the cost of property over its useful life, accounting for wear and tear. Security cameras are generally considered capital improvements, meaning their cost is spread out over a period of years rather than being fully deducted in the year of purchase. The Modified Accelerated Cost Recovery System (MACRS) is the most common depreciation method used for business property.

Under MACRS, security cameras typically fall into a 5-year or 7-year recovery period. For residential rental property, improvements like security cameras are generally depreciated over 27.5 years, while for nonresidential real property, the period is 39 years. Bonus depreciation may also be available, allowing businesses to deduct a larger portion of the asset’s cost in the first year it is placed in service. For 2024, the bonus depreciation rate is 60% and will continue to phase out in subsequent years. This can significantly reduce taxable income in the year of purchase.

Information Required for Deduction

Claiming a tax deduction for security cameras necessitates meticulous record-keeping and specific documentation. Taxpayers must retain receipts or invoices that clearly show the cost of the camera equipment and any associated installation fees. These documents prove purchase and substantiate the amount claimed.

Beyond purchase records, it is important to maintain evidence demonstrating the camera’s primary use for business or rental activity. This can include property management records, business ledgers, or photographs of the cameras installed in a business setting. Such documentation helps establish that the expense was “ordinary and necessary” for the income-generating activity.

The date the property was purchased and the date it was placed in service are crucial, especially for depreciation calculations, as these dates determine when depreciation begins. Records of the total cost used for depreciation, known as the depreciation basis, should also be kept. Maintaining records for any ongoing maintenance or repair costs is advisable, as these expenses may also be deductible.

Reporting Security Camera Deductions

Once all necessary information and documentation have been compiled, reporting security camera deductions involves specific tax forms. The primary form used for reporting depreciation and Section 179 expenses is Form 4562, Depreciation and Amortization. This form details the calculated depreciation amounts or the elected Section 179 expense.

For sole proprietors, the total expensed costs or depreciation amounts calculated on Form 4562 are carried over to Schedule C (Profit or Loss from Business). Rental property owners report these amounts on Schedule E (Supplemental Income and Loss, Rental Real Estate, Royalties, etc.). Corporations and partnerships have their own specific returns; corporations report these deductions on Form 1120 (U.S. Corporation Income Tax Return), while partnerships use Form 1065 (U.S. Return of Partnership Income). Form 4562 must be filed for the first year depreciation or amortization is claimed on an asset, or whenever a Section 179 expense deduction is elected.