De Minimis Safe Harbor
Authority: Treas. Reg. §1.263(a)-1(f)
The de minimis safe harbor is an annual election under the tangible property regulations that lets a business deduct, rather than capitalize and depreciate, purchases of equipment and property below a per-item dollar threshold. Businesses without an applicable financial statement (which is most small businesses) can expense items costing up to $2,500 per item or per invoice; businesses with audited financial statements get a $5,000 threshold. To use it, the business must have a consistent accounting policy of expensing such items and must attach a short election statement to its timely filed return each year. The safe harbor removes arguments with the IRS over whether small purchases are "assets," eliminates depreciation schedules cluttered with laptops and office chairs, and accelerates deductions into the year of purchase.
Example
A studio buys eight cameras at $2,100 each, $16,800 total. With the de minimis election in place, all $16,800 is deducted this year as supplies rather than depreciated over five years, because each item is under the $2,500 threshold.
Related terms
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Bonus Depreciation
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