IRS De Minimis Rule for Deducting Business Property

IRS has established maximum dollars amounts that taxpayers can rely on when expensing certain business property purchases.

Businesses typically have a policy of expensing (that is, currently deducting instead of depreciating) items that cost less than a threshold amount. It’s simply not worth the trouble of depreciating low-cost items over many years. The amount businesses establish as their expensing thresholds vary widely. Smaller businesses have a threshold of $100-$500, while large businesses have thresholds in the thousands.

Until now, the IRS provided no guidance on what the threshold should be, and it was always possible it could argue that a taxpayer’s threshold was too high. However, this has changed. New IRS repair regulations enshrine this threshold expensing practice into law by establishing a new de minimis safe harbor. (IRS Reg. §1.263(a)-1(f).)

Also, for the first time, the IRS has created maximum dollar amounts that may be expensed as “de minimis” (Latin for minor or inconsequential). This safe harbor became available for all taxpayers on January 1, 2014.

Example: Greg purchases 10 printers for her business at $495 each for a total cost of $4,950 as shown by the invoice. By using the de minimis safe harbor, he can deduct the entire $4,950 expense in a single year provided that the requirements to use the safe harbor are satisfied.

For more information click here IRS De Minimis Rule