Can I use De Minimis Safe Harbor to deduct expenses incurred during the prior tax year for items not put into actual service until current tax year??

[Bungalow Captain]

In late 2018, I purchased quite a few items like furniture, linens, drapes, and appliances for use in a vacation rental that started renting and producing income in January of 2019. All of the items I purchased would qualify for De Minimis deduction (each costs under $2500 ) except I incurred these expenses in 2018, not 2019. Can I still write them off under the De Minimis Safe Harbor for 2019, since I actually did not put these items into service until then? I think you can do this with Bonus Depreciation, but I was wondering if you can also do this with De Minimis? If I can, can you point me to the section of IRS code or publication that says I can? I've tried to look, but no luck.

[Critter]

You could have been buying things for years and stockpiling them ... then  you can deduct the lower of the cost or current FMV in the year you placed them in service and you can use the De Minimis option if you choose. 

[Bungalow Captain]

Thanks Critter! This makes logical sense to me, and is what my gut is telling me, although I wish I could find it spelled out specifically in the code some where. I know the Materials and Supplies deduction has a stipulation for items purchased in prior years and then being put into service during the current one. And I think the Bonus Depreciation rules mention something similar as well regarding FMV on the date an item is put into service. Just wish I could find the same language for the De Minimis. It does make sense that the same rules would apply. Do you remember where you might have read it though? It always puts me at ease when I can cross-reference with a publication or snippet of code or something.

[Carl]

If the items were purchased specifically and explicitly for the rental, then yes. That's not a problem at all. It's not at all uncommon to purchase business items and equipment prior to the business actually starting up. Happens all the time. For some business types it can take years to purchase and acquire all that is necessary before the business can actually open.

Generally for a business any non-equipment purchased prior to opening is considered a start-up expense and treated at such. But rental property is not your "standard" business since it produces active income. I.e.; startup expenses are not allowed for rental property. But all that stuff you purchased most definitely can be claimed under safe harbor and expensed if it was purchased for the rental business, and only the rental business.

[Anonymous_]

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@Bungalow Captain wrote:

Just wish I could find the same language for the De Minimis.

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Look at Treas. Reg. §1.263(a)-1(f) (link below).

https://www.law.cornell.edu/cfr/text/26/1.263(a)-1