Deductions & credits

Under the Tax Cuts and Jobs Act (TCJA) rental properties became eligible to use Section 179 on assets (after 2017) that are not real property (land, buildings or their structural components).  It can be used on such things as appliances.  

The De Minimis Safe Harbor is another rule and there are two types.

1. Improvements
2. Other Assets

De Minimis Safe Harbor for Improvements Election

This election is an option you can take each year that lets you write off some building improvements as expenses instead of assets.

Here are the rules you need to meet to take this election:

• Your gross receipts, including all your other income, are $10,000,000 or less.
• Your eligible building has an unadjusted basis of $1,000,000 or less.
• The cost of all repairs, maintenance and improvements is less than or equal to the smallest of these limits: 
  • 2% of the unadjusted basis of your building or
  • $10,000

This election for building improvements is called the Safe Harbor Election for Small Taxpayers. If you decide to take this option, a form called Safe Harbor Election for Small Taxpayers will show up in your tax return. This election will apply to all your businesses, rental properties or farms.

De Minimis Safe Harbor Other Assets Election

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/deduct items $2,500 or less as expenses instead of assets. Expenses typically reduce your income by a larger amount than depreciating an asset over multiple years does. This means you could get a bigger refund.

If you decide to take this option, a form called De Minimis Safe Harbor Election will show up in your tax return. This election will apply to all your businesses, rental properties or farms.