Tools and Equipment for Your Handmade Business — When to Expense vs Depreciate
Bought a Cricut, kiln, or sewing machine for your handmade business? Here's how to deduct it correctly — and why most maker equipment qualifies for an immediate write-off.
Nobody explains this when you open your Etsy shop. You buy a Cricut, a heat press, a KitchenAid, a kiln (whatever your craft demands), and then tax time arrives and you’re left wondering: is this an expense? Does it depreciate? What even is depreciation?
Here’s the short version: for most makers buying equipment under $2,500, you can deduct it immediately in the year you bought it. No depreciation schedule. No complicated calculations. Just an expense.
The longer version covers why that’s true, when it doesn’t apply, and how to actually record it.
What counts as “tools and equipment” for your handmade business?
For tax purposes, tools and equipment are physical assets you buy to make products or run your business. If it helps you create, photograph, package, or ship your work, it counts.
Common examples for makers:
- Cutting machines: Cricut Maker, Silhouette Cameo, CO2 laser cutters
- Craft-specific machinery: pottery kilns, glass kilns, resin UV lamps, jewelry torches, rock tumblers, lapidary equipment
- Sewing and textile tools: sewing machines, embroidery machines, sergers, heat presses
- Food equipment: KitchenAid stand mixers, dehydrators, commercial kitchen scales
- Photography gear: cameras, ring lights, lightboxes, backdrops
- Packaging and shipping: label printers, postal scales, heat sealers
- Workshop tools: band saws, scroll saws, routers, engravers, soldering stations
If you use it for your business, it’s a business asset. The question is whether you expense it all at once or spread the deduction over several years.
The two ways to deduct equipment
Option 1: Direct expense (immediate deduction)
You buy the item, you deduct the full cost that year. Done.
This is what most makers can do, and there are two IRS rules that make it possible.
The $2,500 de minimis safe harbor is the one you’ll use most often. Under this rule, any item that costs $2,500 or less per invoice (or per item, if invoiced separately) can be deducted as a regular business expense in the year you bought it. No depreciation. No special forms. You just record it as an expense.
The $2,500 limit applies per item, not per year. You can buy ten $800 items in the same year and expense all of them.
To use this rule, you do need to make a formal election on your tax return each year. In practice, most accountants do this automatically once you’ve mentioned it. Worth confirming with yours.
IRS Section 179 is the other route. It lets you deduct the full purchase price of qualifying equipment in the year you buy it, up to a very generous cap ($1,160,000 in 2026, which is far above what most makers will ever spend). For practical purposes, Section 179 does the same thing as the de minimis safe harbor, just with a higher ceiling and a dedicated tax form (Form 4562).
Most makers under $2,500 per item will use the de minimis safe harbor and not need to think about Section 179 at all. But if you buy something more expensive (a commercial embroidery machine, a high-end laser cutter, a professional kiln), Section 179 is how you get an immediate deduction instead of depreciation.
Option 2: Depreciation (spread over years)
Depreciation is what happens when you don’t elect immediate expensing. The IRS assigns assets a useful life (5, 7, 15 years depending on the category), and you deduct a portion of the cost each year.
For a $3,000 sewing machine with a 5-year life under standard depreciation (MACRS), you’d deduct roughly $600/year rather than $3,000 in year one.
Depreciation makes sense in specific situations. If you had a low-income year and want to preserve deductions for higher-earning years, spreading it out can help. But for most makers, taking the immediate deduction is simpler and better for cash flow.
The practical reality: if your equipment costs under $2,500, you can expense it immediately under the de minimis safe harbor. If it costs more, Section 179 usually still lets you deduct it all in year one. Depreciation is a fallback, not the default.
When does the $2,500 threshold actually matter?
The threshold determines which path you follow, but it doesn’t determine whether you get a deduction. You get a deduction either way.
What changes is:
- Under $2,500: deduct as an expense in the current year, no extra form required
- Over $2,500: typically still deduct in the current year via Section 179, but you’ll file Form 4562 and your accountant needs to be involved
The distinction is more administrative than financial. If your Cricut costs $399, it’s an expense and you move on. If your commercial embroidery machine costs $8,500, it’s a capital expenditure, and you’ll want to talk to your accountant about whether to take Section 179 or spread it over the asset’s useful life.
One thing to keep in mind: business-use percentage matters. If you use equipment 80% for business and 20% for personal use, you can only deduct 80% of the cost. Pure business-use equipment is fully deductible; mixed-use equipment requires you to track the split.
A note on state taxes
Federal Section 179 is generous. State conformity is not.
Many states don’t fully conform to federal Section 179 rules. Some cap the deduction at a much lower amount. Some require you to add back the federal deduction and use state depreciation rules instead. California, for example, caps Section 179 at $25,000 rather than the federal $1,160,000.
This doesn’t affect your federal return (the federal deduction stands), but it can mean you owe state tax on the amount you expensed federally. Your accountant will handle this if they know you’re taking a large Section 179 deduction, so make sure to tell them.
For equipment under $2,500 using the de minimis safe harbor, state conformity is less of an issue. Most states follow federal treatment for small items. Worth confirming with your accountant if you’re in California, New York, or another state with known conformity gaps.
How to record equipment in Craftybase
Craftybase’s Expenses module is designed for exactly this: tracking business purchases that don’t go through your materials and recipes workflow.
For immediately expensed equipment (de minimis or Section 179 election):
- Open the Expenses section in Craftybase
- Create a new expense with the date of purchase and full amount
- Categorise it as “Tools & Equipment” or “Equipment” (or whatever category you use for non-material business purchases)
- Add a note indicating it’s a de minimis or Section 179 expense for your accountant’s reference
That’s it. The expense appears in your financial reports, which you or your accountant can pull at year-end.
For depreciable assets (over $2,500, not taking Section 179):
Craftybase doesn’t generate depreciation schedules (that’s accounting software territory). What you can do:
- Record the full purchase in Craftybase Expenses so you have it documented
- Note in the description that it’s a depreciable asset and the purchase price
- Hand that information to your accountant; they’ll calculate the annual depreciation and apply it to your return
The key is having the purchase recorded somewhere with the date, amount, and what it is. Craftybase gives you that record. The depreciation calculation happens in your tax return, not in your inventory software.
Year-end: pulling equipment expenses for Schedule C
Schedule C is where your business expenses live, and Part II is where you list them out.
Equipment expenses go in a few places depending on how you treated them:
- Line 22 (Supplies): small tools and minor equipment you’re treating as supplies rather than capital assets
- Line 13 (Depreciation and Section 179): if you’re taking Section 179 or depreciation, this requires Form 4562 attached to your return
- Line 27a (Other expenses): for de minimis safe harbor items and other equipment not fitting elsewhere
There’s no single universal answer on which line. Your accountant will decide based on how they’re treating each item. What you need to provide is a clear list of what you bought, when, and how much it cost.
From Craftybase, run your Expenses report for the tax year. Filter for equipment-related categories. Export it. That’s the list your accountant needs.
If you tracked expenses throughout the year as each purchase happened, this takes about five minutes. If you’ve been keeping receipts in a pile and haven’t recorded anything, it takes considerably longer. That’s the argument for recording in real time rather than at year-end.
What about equipment you owned before starting your business?
Gear you bought before your business existed can still be deducted. You just need to establish the fair market value at the time you put it into business use, not the original purchase price.
For example: you’ve had a DSLR camera for three years for personal use. You start selling handmade jewellery and start using it exclusively for product photography. You can now deduct the camera as a business asset, but the deductible amount is its current market value (what you could sell it for today), not what you paid for it.
For Section 179 or de minimis elections on converted personal property, document the conversion date and fair market value at conversion. Your accountant will want this.
Frequently Asked Questions
Can I deduct my Cricut as a business expense?
Yes. A Cricut used for your handmade business is a deductible business expense. Because Cricuts and Silhouettes typically cost under $2,500, they qualify for the IRS de minimis safe harbor — you deduct the full purchase price in the year you bought it, no depreciation schedule required. Record it as an equipment expense in Craftybase and include it on Schedule C Part II at tax time. If you also use your Cricut for personal projects, deduct only the business-use percentage.
What is the $2,500 de minimis safe harbor and how does it work?
The de minimis safe harbor is an IRS rule that lets you deduct any item costing $2,500 or less per invoice as a direct business expense in the year of purchase — instead of depreciating it over years. It applies per item, so you can expense multiple items in the same year as long as each individual purchase is $2,500 or under. To use it, your accountant needs to make a formal election on your tax return annually. Most do this automatically, but confirm with yours.
What is IRS Section 179 and does it apply to handmade businesses?
Section 179 is an IRS provision that lets you deduct the full cost of qualifying equipment in the year you buy it, even for items over $2,500. The 2026 deduction limit is $1,160,000 — far beyond what most makers spend. It applies to any sole proprietor or LLC with handmade business income, including Etsy and Shopify sellers. You claim it on Form 4562. For equipment under $2,500, the de minimis safe harbor is simpler; Section 179 becomes relevant for higher-cost equipment like kilns, commercial embroidery machines, or laser cutters.
How do I record equipment purchases in Craftybase?
Use the Expenses module in Craftybase to log equipment purchases as they happen. Add the date, amount, and a description that's clear enough for your accountant — for example, "Cricut Maker 3 — de minimis, business use 100%" or "Commercial kiln — Section 179 candidate, confirm with accountant." At year-end, run the Expenses report, filter for equipment, and hand the export to your accountant. Craftybase doesn't calculate depreciation schedules, but it creates the purchase record your accountant needs to do that work.
Where do equipment expenses go on Schedule C?
It depends on how your accountant treats each item. De minimis safe harbor items (under $2,500) typically appear on Line 27a (Other expenses) or Line 22 (Supplies). Section 179 deductions go on Line 13 and require Form 4562 attached to your return. Small consumable tools may go on Line 22. Your accountant decides the correct line — your job is to give them a clear record of what you bought and when. Craftybase's Expenses report gives you exactly that.
Do all US states follow federal Section 179 rules?
No. Many states have their own Section 179 limits that are lower than the federal cap. California, for example, caps the deduction at $25,000 rather than the federal $1,160,000. This means you could owe state tax on an amount you fully deducted federally. The de minimis safe harbor (under $2,500) has better state conformity and is less likely to create a state/federal mismatch. If you're taking a large equipment deduction, confirm with your accountant how your state handles it.
The bottom line
You don’t need to understand depreciation schedules to run your handmade business. In most cases, the answer is simple: buy the equipment, record it as an expense, deduct it this year.
The $2,500 de minimis safe harbor covers the vast majority of what makers buy. A Cricut, a kiln, a sewing machine, a camera: all of these typically fall under the threshold and can be written off immediately. For the rare purchase above $2,500, Section 179 usually still lets you take the full deduction in year one.
What matters is that you’re recording these purchases as they happen, not scrambling at tax time to reconstruct what you spent. Craftybase’s Expenses module is built for this: log each purchase with a description clear enough for your accountant, and you’ll spend about five minutes generating your Schedule C equipment list at year-end rather than several hours.
If you’re not already tracking your business expenses in one place, start your free Craftybase trial and set up your Expenses module before the next purchase lands in your inbox.
This post is for informational purposes only and doesn’t constitute tax advice. Tax rules change and vary by state. Consult a qualified accountant or tax professional for advice specific to your situation.
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