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mwarney
Level 3

Is there a maximum total amount that can be expensed under 1263a1f safe harbor election? i.e. 100 items on separate invoices, each cost $2,000. Can you expense $200,000?

I've searched everywhere and cannot find a statement to address whether or not there is a annual or cumulative dollar limit on expensing items under the di minimis safe harbor rule.  Is it up to the tax payer to decide?
19 Replies
CherylW
Level 3

Is there a maximum total amount that can be expensed under 1263a1f safe harbor election? i.e. 100 items on separate invoices, each cost $2,000. Can you expense $200,000?

Here is the IRS' guidance on de minimis:

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).

Here is the entire cite from the IRS:


mwarney
Level 3

Is there a maximum total amount that can be expensed under 1263a1f safe harbor election? i.e. 100 items on separate invoices, each cost $2,000. Can you expense $200,000?

Yes I read all that.  Did I miss the part about whether there is a cumulative limit?
CherylW
Level 3

Is there a maximum total amount that can be expensed under 1263a1f safe harbor election? i.e. 100 items on separate invoices, each cost $2,000. Can you expense $200,000?

This, from the guidelines above:
What is the de minimis safe harbor election?
Under the final tangibles regulations, you may elect to apply a de minimis safe harbor to amounts paid to acquire or produce tangible property to the extent such amounts are deducted by you for financial accounting purposes or in keeping your books and records. 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).
mwarney
Level 3

Is there a maximum total amount that can be expensed under 1263a1f safe harbor election? i.e. 100 items on separate invoices, each cost $2,000. Can you expense $200,000?

Yes, I get it...  Is there a cumulative limit?  Should I assume that by not saying anything in that regard, that there is no dollar limit? (See my example above)
mwarney
Level 3

Is there a maximum total amount that can be expensed under 1263a1f safe harbor election? i.e. 100 items on separate invoices, each cost $2,000. Can you expense $200,000?

I understand that there is a $2,500 per invoice cutoff.  Is there no limit to the cumulative total dollars that can be expensed in one tax year? (i.e. Sec 179 could not be used to create a loss)
CherylW
Level 3

Is there a maximum total amount that can be expensed under 1263a1f safe harbor election? i.e. 100 items on separate invoices, each cost $2,000. Can you expense $200,000?

I've been looking and I don't see anything that states a cumulative limit.
mwarney
Level 3

Is there a maximum total amount that can be expensed under 1263a1f safe harbor election? i.e. 100 items on separate invoices, each cost $2,000. Can you expense $200,000?

I didn't either...  But I didn't want to assume without checking with someone.  So apparently this rule can be used to create a loss.
takirch11
New Member

Is there a maximum total amount that can be expensed under 1263a1f safe harbor election? i.e. 100 items on separate invoices, each cost $2,000. Can you expense $200,000?

The IRS De Minimis Guideline cite mentioned in the answer above states the following:

The requirements of the safe harbor election for small taxpayers are:

The total amount paid during the taxable year for repairs, maintenance, improvements, or similar activities performed on such building property doesn't exceed the lesser of-
- Two percent of the unadjusted basis of the eligible building property; or
- $10,000 (for questions about how to calculate the unadjusted basis, refer to "Figuring the Unadjusted Basis of Your Property" in Publication 946

Hope this helps
TaxGuyBill
Level 9

Is there a maximum total amount that can be expensed under 1263a1f safe harbor election? i.e. 100 items on separate invoices, each cost $2,000. Can you expense $200,000?

@takirch11   The Safe Harbor for Small Taxpayers is a completely separate election than the De Minimis election.
mwarney
Level 3

Is there a maximum total amount that can be expensed under 1263a1f safe harbor election? i.e. 100 items on separate invoices, each cost $2,000. Can you expense $200,000?

@takirch11 I think what you quoted is about rental property.
takirch11
New Member

Is there a maximum total amount that can be expensed under 1263a1f safe harbor election? i.e. 100 items on separate invoices, each cost $2,000. Can you expense $200,000?

yes. my context was rental property.

TaxGuyBill, I'm interested in more details on why the "safe Harbor for Small Taxpayers" is completely separate from the "De Minimis election", given the many references to the "De Minimis Safe Harbor" election. Thanks!
TaxGuyBill
Level 9

Is there a maximum total amount that can be expensed under 1263a1f safe harbor election? i.e. 100 items on separate invoices, each cost $2,000. Can you expense $200,000?

They are two completely different elections.

If you qualify for the De Minimis Election (and actually make the election) , it allows you to deduct items up to $2500.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations#Ad...>

If you qualify for the Safe Harbor Election for Small Taxpayers (including the 2%/$10,000 limit for all repairs, maintenance, and improvements) and actually make that election, you can deduct ALL amounts, regardless of cost.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations#Sa...>
mwarney
Level 3

Is there a maximum total amount that can be expensed under 1263a1f safe harbor election? i.e. 100 items on separate invoices, each cost $2,000. Can you expense $200,000?

"Safe Harbor" and "De Minimis" are not separate and specific elections.  They are descriptive terms often used together to designate IRS policy on a matter.  There are "De Minimis Safe Harbor" rules and amounts scattered throughout IRS regulations on various subjects.  The reg I was referring to is a "Safe Harbor De Minimis" election on capitalization.
TaxGuyBill
Level 9

Is there a maximum total amount that can be expensed under 1263a1f safe harbor election? i.e. 100 items on separate invoices, each cost $2,000. Can you expense $200,000?

There are many "safe harbors", but the "Safe Harbor Election for Small Taxpayers" (2%/$10,000 rule) has nothing to do with the De Minimis Election ($2500 or less rule).  They are two separate elections.

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