The De Minimis Safe Harbor rules, the second topic in our series, allow you to annually elect to expense certain expenditures if you have a written policy in place at the beginning of your tax year. Generally, if you have a policy in place, this rule must be applied when you spend less than a certain dollar amount on tangible property; inventory, amounts paid for land, and certain rotable and temporary spare parts are excluded from this provision.
Here are some additional highlights (and what you should consider including in your written capitalization policy):
- Must be in place by beginning of your tax year, which is January 1st for many taxpayers.
- May elect to expense up to $500, or $5,000 for taxpayers with an applicable financial statement (AFS), per invoice or item; generally, an AFS is an audited financial statement, required to be filed with the SEC or provided to a federal or state government or agency.
- Must be consistent with your book capitalization policy.
What this means to you: Through using the De Minimis Safe Harbor rules you may accelerate your deductions by expensing items in the current year, rather than depreciating over the useful life.