I'll echo the advice of others to talk to an accountant. Actually, the article Mt. Spokane linked to is pretty good at providing an overview and is consistent with my own experience.
Between the time I retired from my original career and when I went back to work as an employee for my current employer (now semi-retired and working part time), I established a sole proprietorship for my
photography and writing contractual work.
First thing to understand, and something that many barstool experts on this forum fail to comprehend, is that everything you deduct, whether it is as an expense or as depreciation on large purchases, only reduces the amount you declare as profit and the
taxes on that profit.
Let's say, for example, you have $3,000 in expenses and another $3,000 in depreciation. That doesn't mean you get to take $6,000 off your taxes. That should be obvious, but you'd be surprised at how many people who aren't in business for themselves, don't get that. Instead that $6,000 reduces your
taxable income. If you had income of $60,000 the expenses and depreciation could reduce your taxable income to $54,000. In other words, your actual savings would be the
taxes that you would have owed on that $6,000.
It's really quite a simple concept if you stop and think about it. That $6,000 that you spent came right off the profits that you earned. You never saw that profit and the government isn't going to
tax you for something you never received. Let's say you are in a 15%
tax bracket. The $6,000 in expenses and depreciation, will save you $900 on the
taxes you owe. Understand that's greatly simplifying things and using random numbers and percentages, but I hope you'll get the idea.
One additional thing to consider is that once you make the decision to declare an item as a business expense, you are strictly limited in how much you can use it for personal purposes. Not going to get into details, but essentially you have to reduce your deductions to take into account personal use and if personal use is too high, you may not be able to deduct anything.
I still have my sole proprietorship and I still deduct a few small business expenses that are directly related to my freelance work. But I don't even bother trying to amortize any equipment because it's just too complicated and the benefits are too insignificant for me.
One final note: I welcome corrections from anyone who actually knows what they are talking about. I tend to err on the side of caution when it comes to taxes because it just isn't worth the risk to me to push the envelope for very little gain.