Rives & Associates

IRS Increases Tangible Property De Minimis Safe Harbor Expense Threshold to $2,500

IRS Increases Tangible Property De Minimis Safe Harbor Expense Threshold to $2,500

After receiving more than 150 letters from businesses and their representatives, the IRS has increased the de minimis safe harbor threshold from $500 to $2,500 for small businesses that do not maintain an applicable financial statement (an audited financial statement) – per IRS Notice 2015-82. This means that businesses can deduct certain expenditures that are substantiated by an invoice up to the new $2,500 limit (previously $500 per the 2014 final tangible property regulations); thereby eliminating the requirement to capitalize those items and deduct them over a period of years through depreciation expense. The notice is effective for costs incurred during taxable years beginning on or after January 1, 2016.

In contrast to those businesses that do have an AFS, the general consensus is that businesses without an applicable financial statement (AFS) are not required to have a written capitalization policy in place. Nevertheless, we recommend to our clients who are affected by this notice to create or update their capitalization policy to reflect the new safe harbor limit, and to then adhere to the policy by consistently capturing relevant transactions in their accounting records.

Please contact Rives & Associates, LLP to find out how these changes affect your business:
Charlotte Office – Aaron Patel, CPA – 704-372-0960 – aaron@rivescpa.com
Lexington Office – Tom Cornwell, CPA – 919-832-6848 – tcornwell@rivescpa.com
Lexington Office – John Parsley, CPA – 336-248-8281 – jparsley@rivescpa.com
Lake Norman Office – Jay Lesemann, CPA – 704-895-6966 – jlesemann@rivescpa.com

More information can be found here in IRS Notice 2015-82: https://www.irs.gov/pub/irs-drop/n-15-82.pdf