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.
