Expensing vs. Capitalizing

De Minimis Safe Harbor Limit

For tax years beginning on January 1, 2016 or later, the IRS has increased the de minimis safe harbor threshold for expensing from $500 to $2,500 per invoice or item for taxpayers without applicable financial statements. This limitation is for purposes for determining whether a particular expense qualifies under safe harbor, they are not intended as a ceiling on the amount you can deduct as a business expense. Items or invoices greater than $2,500 still need to be capitalized and depreciated over their useful lives.

This is an election, not a change, in accounting method. The de minimis safe harbor election needs to be made annually with a timely filed tax return, including extensions. The de minimis safe harbor election does not include amounts paid for inventory or land.

For questions, please contact Justin Work, CPA at 314-576-1350 or jwork@bwtpcpa.com.

Justin Work, CPA is a Supervisor with BWTP P.C.

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