De Minimis Safe Harbor Election — Expense Small Equipment and Tools Instead of Capitalizing Them
What Is It?
The tax de minimis safe harbor allows qualifying taxpayers to deduct small-dollar tangible property purchases instead of capitalizing and depreciating them.
What Most People Don’t Know
- The invoice threshold differs depending on whether you have an applicable financial statement (AFS).
- For taxpayers without an AFS, the IRS has historically used a $500 per invoice or item limit; taxpayers with an AFS can use a higher threshold under the regulation.
- This is an annual election.
Frequently Asked Questions
Is this just a bookkeeping preference?
A: No. It is a tax safe harbor election under the tangible-property regulations.
Why use it?
A: Because it lets businesses deduct many small-dollar asset purchases immediately instead of tracking depreciation.