De Minimis Safe Harbor Question

[ZachV]

Hello,
I started my business in the beginning of 2022 as a SMLLC, this is also my first time ever paying takes-I am 20. I am using the cash method. My business made enough money for me to upgrade my camera equipment. Let's say that I made $7000 and bought a used lens from a retailer for $1000+tax and then another used lens from a second retailer for $1200+tax, and then a final order for a filter and battery charge for $200+tax. Based on what I read online, I can claim each of these under De Minimis Safe Harbor, but do I also claim the tax on the items? Second question, if so, do I combine all of the prices and just list one number, or list them separately? Last question, claiming these items will not in any way affect the supplies that I am claiming on my schedule c like the base cost calendars and shipping labels. Thank you.

[Anonymous_ · Accepted solution]

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@ZachV wrote:

....I can claim each of these under De Minimis Safe Harbor, but do I also claim the tax on the items?

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Yes, you can deduct the cost of an item (including tax) provided the item costs $2,500 or less.

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@ZachV wrote:

...do I combine all of the prices and just list one number, or list them separately?

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The safe harbor is a maximum of $2,500 per invoice. If you purchased the items separately, then list them separately.

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@ZachV wrote:

...claiming these items will not in any way affect the supplies that I am claiming on my schedule c like the base cost calendars and shipping labels.

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No, the cost of supplies you are claiming as deductions on your return will not be impacted by the safe harbor election.

See https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations

[leeloo]

List them separately. You may sell or otherwise dispose of one of them.

See this advice from ToddL.

Items expensed under the de  minimus safe harbor provision do not get tracked to their eventual disposal.

In order to track an item (asset) for purposes of calculating any gain (loss) on disposal, it has to be entered as an "asset" in the "Business Assets" section of "Your Business".

Should you ever dispose of (i.e. sell) an item expensed under the de minimus safe harbor provision, you would be responsible for reporting any gain on sale. Its adjusted cost basis would be zero ("0"), so there wouldn't be any loss on disposal.

[ZachV]

Great, thank you! I thought of one other thing, along with the order of the lens, I bought a warranty, would the warranty be included on the claim with the schedule C

[Anonymous_]

You can deduct the cost of the asset plus tax, insurance, shipping, et al, provided the cost is related to the purchase price of the asset.