Here is where you are mixed up ... close but not the same ...
De Minimis Safe Harbor Election- IN THE PROGRAM interview
The regulations provide a $500 safe harbor amount for most businesses to deduct expenditures that
otherwise require capitalization (or $5,000 for businesses with an Applicable Financial Statement)
[Reg. 1.263(a)-1(f)]. The FAQs clarify that the $500 or $5,000 limits are not intended as a ceiling on the
amount that can be deducted as a business expense. For example, a business may have much larger
expenditures for incidental materials and supplies such as fuel, and those expenditures remain fully
deductible. The guidance states that “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.”
The guidance reminds that the treatment under the de minimis election for tax purposes must be
consistent with expensing on the books and records of the business.
A new development in the FAQs relates to the ability to elect the de minimis safe harbor for items
costing $500 or less, but also to maintain an internal policy to deduct a greater dollar amount.
Previously, most commentators had assumed that an election to adopt the $500 de minimis amount
precluded the use of a larger internal expensing policy (e.g., a policy to expense all asset acquisitions
under $1,000). In fact, the FAQs advise taxpayers using a larger de minimis policy to still elect the
$500 safe harbor in order to protect those smaller expenditures from any IRS exam dispute. This
suggests that virtually every business return should add the de minimis expensing election, and do so
annually.
The de minimis election is made by attaching a statement to the tax return. The statement must be
titled “Section 1.263(a)-1(f) de minimis safe harbor election” and include the taxpayer's name,
address, taxpayer identification number, and a statement that the taxpayer is making the de minimis
safe harbor election under §1.263(a)-1(f).
Election to Capitalize Repair and Maintenance Costs - IN THE PROGRAM but accessed only thru FORMS mode
There are circumstances in which taxpayers would rather capitalize repairs for tax purposes. The IRS
FAQs remind that Reg. 1.263(a)-3(n) permits an election to capitalize repairs and maintenance as
improvements, if these costs are treated as capital expenditures for financial accounting purposes (or
as the regulations state “on its books and records regularly used in computing income”). The election
is made by attaching a statement to the timely filed original federal tax return stating that the
taxpayer is electing to capitalize repair and maintenance costs that have also been capitalized on its
books and records. As an annual election, it is not an accounting method and does not need to be
applied consistently.
The statement to make this election must be titled “Section 1.263(a)-3(n) Election” and include the
taxpayer's name, address, taxpayer identification number, and a statement that the taxpayer is
making the election to capitalize repair and maintenance costs under §1.263(a)-3(n).
https://www.claconnect.com/WorkArea/DownloadAsset.aspx?id=18678#:~:text=Election%20to%20Capitalize%2...).
