The De Minimis safe harbor is the last safe harbor outlined by the final IRS regulations. Landlords can use this safe harbor to deduct low-cost personal property items used in their business. It does not matter if the item would be considered a repair or an improvement as long as the item costs less than $2,500.
Yes, since the paint and flooring were each less than $2,500 and on separate invoices, you can elect the de minimis safe harbor. See below for the IRS treatment of amounts in excess of the $2,500 amount.
Per the IRS "Tangible Property Regulations - Frequently Asked Questions" at the following link: https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations#Ad...
Effective for taxable years beginning on or after January 1, 2016, the Internal Revenue Service in Notice 2015-82 increased the de minimis safe harbor threshold from $500 to $2500 per invoice or item for taxpayers without applicable financial statements. In addition, the IRS will provide audit protection to eligible businesses by not challenging the use of the $2,500 threshold for tax years ending before January 1, 2016 if the taxpayer otherwise satisfies the requirements of Treasury Regulation § 1.263(a)-1(f)(1)(ii).
If you use the de minimis safe harbor, do you have to capitalize all expenses that exceed the
$2,500 ($500 prior to 1-1-2016)
or $5,000 limitations?
No. Amounts paid for the acquisition or production of tangible property that exceed the safe harbor limitations aren't subject to the de minimis safe harbor election. Therefore, the safe harbor doesn't require you to capitalize all amounts paid for tangible property in excess of the applicable limitation. If an amount doesn't qualify under the de minimis safe harbor, you should treat the amount under the normal rules that apply, i.e., currently deductible if paid for incidental materials and supplies or for repair and maintenance. This treatment is proper regardless of whether the amount exceeds the applicable de minimis safe harbor limitation. The de minimis safe harbor is simply an administrative convenience that generally allows you to elect to deduct small-dollar expenditures for the acquisition or production of property that otherwise must be capitalized under the general rules.
