State tax filing
This election for items $2,500 or less is called the De Minimis Safe Harbor Election. This election is an option you can take each year that lets you write off items $2,500 or less as expenses instead of assets. This election will apply to all your businesses, rental properties, or farms.
Here are the rules you need to meet to take this election:
- You don't have an applicable financial statement (AFS) [If you do have an AFS you can deduct amounts paid for tangible property up to $5,000 per invoice or item.]
- You have a consistent process for how you record expenses and assets;
- You record these items as expenses on your books/records;
- The cost of each item as shown on your receipt is $2,500 or less.
1. The questions referred to above are in the TurboTax personal tax products (Schedules C and E).
2. No - You do not need to break-out or report the amount of the election. Just include the expenses as you would other repairs, etc. (e.g. Form 8825, Line 10).
3. The IRS states: "If you have an applicable financial statement (AFS), you may use this safe harbor to deduct amounts paid for tangible property up to $5,000 per invoice or item (as substantiated by invoice). If you don't have an AFS, you may use the safe harbor to deduct amounts up to $2,500 ($500 prior to 1-1-2016) per invoice or item (as substantiated by invoice). It mentions no aggregate limits.
4. On Unit 2, see the answer to #3 -- "per invoice or item (as substantiated by invoice)."
5. You have to elect the de minimis safe harbor election each year.
For more information on the de minimis safe harbor election please see the following article on the IRS website: Tangible Property Regulations - Frequently Asked Questions
To make the election in a 1065 return in TurboTax Business please follow these steps:
- Click Federal taxes > Other
Continue to the Tax Elections screen and click the Yes box.
On the Election Forms screen, mark the box Election for the De Minimis Safe Harbor (Section 1.263(a-1(f) and click Continue.
