If you choose to depreciate them, you would list them in the asset section. If it qualifies under the Safe Harbor or Improvements Election, you would add them as expenses. These options are found in the deprecation section as well.
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. 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.
Here
are the rules you need to meet to take this election:
- You don't have
an applicable financial statement (most people don't).
- 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.
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.
To
make either of the elections please follow these steps:
