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Lili444
Level 2

Does De Minimus Safe Harbor election supersede my normal treatment of assets that cost under $200?

For example: normally when I purchase things like office chairs, cutting mats, pressing mats, storage drawers etc that cost under $200 I would just expense them as supplies on line 22 of my schedule c. Since I’m electing to claim the De Minimus safe harbor election this year do I now just list all those small items as De Minimus and bundle them on “other expenses”?
11 Replies
MaryK1101
Expert Alumni

Does De Minimus Safe Harbor election supersede my normal treatment of assets that cost under $200?

You will make sure you select the election, then add as Other Miscellaneous Expenses.  You will want to add each item separately.

 

Here's how to add your purchases that are $2,500 or less as miscellaneous expenses:

  • Select Continue and then Add expenses for this work.
  • Choose Other miscellaneous expenses.

 

For items $2,500 or less is you can take the De Minimis Safe Harbor Election. 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.  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

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Lili444
Level 2

Does De Minimus Safe Harbor election supersede my normal treatment of assets that cost under $200?

Ok, so you suggest itemizing each item on part v rather then just adding it all up and putting in the total under the title “De Minimus safe harbor election”?

I appreciate that advice. That still doesn’t answer my question though.
I’m wondering if all the little items that cost under $200 that I would normally just deduct as “supplies“ on line 22 should still be treated as supplies and deducted on line 22 or if I instead need to claim them on Part v other expenses under the De Minimus election. 

Lili444
Level 2

Does De Minimus Safe Harbor election supersede my normal treatment of assets that cost under $200?

Maybe the way I’m wording it is confusing. 
I’ll try rephrasing.. 

 

Normally I just expense small items that could be depreciated, as “supplies” if their accusation cost under $200.

Since I’m electing to use De Minimus safe harbor this year do I still expense those small items as supplies and list them on line 22 of schedule c or am I required to deduct them under the De Minimus election with the larger assets that I’m claiming De Minimus on. (If that’s the case and I’m supposed to itemize each of those items that cost under $200 under the De Minimus safe harbor that will be a really long list.) 

 

My confusion on how to treat those little expenses comes from the rules of using De Minimus safe harbor that essentially says “all items that qualify under the election must be included under it”. 

MaryK1101
Expert Alumni

Does De Minimus Safe Harbor election supersede my normal treatment of assets that cost under $200?

Yes, it is best to list separately because the total may be more than the De Minimus which may cause an issue.  You can report all the Supplies on Line 22- the De Minimus generally applies to things you would normally depreciate because they have a useful life of more than one year.  Supplies are used up (example paper, cleaning supplies, etc)

 

@Lili444

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Lili444
Level 2

Does De Minimus Safe Harbor election supersede my normal treatment of assets that cost under $200?

I appreciate you taking the time to respond. That answer still leaves me confused though.

You’re saying to continue to list my supplies on line 22 “supplies are used up (example, paper, cleaning supplies, etc)”. I understand that. What I don’t understand is how to treat the things that able to be depreciated but I normally just treat a a supply. 
To be super specific, I bought a chair this year that cost me $50. It has a useful life of over 1 year. Some people would consider that an 5 year depreciable asset but I choose to just consider it a “supply” and expense it since it’s value is under $200. Because I’m electing the De Minimus safe harbor do I need to include that $50 chair under the election? Or is it still considered a supply that goes on line 22 because that’s how I treat small items. I’m just trying to understand if the De Minimus election overrides how I normally treat these types of items. 

If you can spell it out for me like I’m a toddler and explain where I should be deducting my $50 chair that would be much appreciated  🙂 

ColeenD3
Employee Tax Expert

Does De Minimus Safe Harbor election supersede my normal treatment of assets that cost under $200?

You can't just choose to treat something differently than how the IRS requires you to treat it. When the IRS says that something that has a useful life of more than one year must be depreciated, that is exactly what they mean. A chair is not a supply that gets used up.

 

Property Lasting More Than One Year

To be depreciable, property must have a useful life that extends substantially beyond the year you place it in service.

 

Pub 946

 

Since there is now a way to expense, through the De Mimimus election, you are now allowed to expense these assets in that manner.

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Lili444
Level 2

Does De Minimus Safe Harbor election supersede my normal treatment of assets that cost under $200?

I’m not attempting to treat something differently then how the IRS requires... unless I’m understanding the rules wrong? 

The property in question need only fit into ONE of these categories to qualify as a material or supply.
My $50 office chair fits the rule of being under $200, thus it is considered a supply. 
Am I wrong on that?

 

“Materials and supplies are tangible, non-inventory property used and consumed in your operations including:

  • Acquired components – Costs of components acquired to maintain, repair, or improve tangible property owned, leased, or serviced by you and that's not acquired as part of a larger item of tangible property; or
  • Consumables – Costs of fuel, lubricants, water, and similar items that are reasonably expected to be consumed in 12 months or less, beginning when used in operations; or
  • 12 month property – Costs of tangible property that has an economic useful life of 12 months or less, beginning when the property is used or consumed in your operations; or
  • $200 property – Costs of tangible property that has an acquisition cost or production cost of $200 or less.”

 

ColeenD3
Employee Tax Expert

Does De Minimus Safe Harbor election supersede my normal treatment of assets that cost under $200?

Here is my source. What is yours? Can you provide a link?

 

Section 162 of the Internal Revenue Code (IRC) allows you to deduct all the ordinary and necessary expenses you incur during the taxable year in carrying on your trade or business, including the costs of certain materials, supplies, repairs, and maintenance. However, section 263(a) of the IRC requires you to capitalize the costs of acquiring, producing, and improving tangible property, regardless of the size or the cost incurred. The tax law has long required you to determine whether expenditures related to tangible property are currently deductible business expenses or non-deductible capital expenditures. Before the issuance of the final tangible property regulations on Sept. 17, 2013, [Treasury Decision 9636 ("final tangibles regulations")], your decisions were guided by decades of often conflicting case law, as well as administrative rulings on specific factual situations.

 

The final tangibles regulations combine the case law and other authorities into a framework to help you determine whether certain costs are currently deductible or must be capitalized. The final tangibles regulations also contain several simplifying provisions that are elective and prospective in application (for example, the election to apply the de minimis safe harbor, the election to utilize the safe harbor for small taxpayers, and the election to capitalize repair and maintenance costs in accordance with books and records).

 

 

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ColeenD3
Employee Tax Expert

Does De Minimus Safe Harbor election supersede my normal treatment of assets that cost under $200?

I found a reference from back in 2014. In 2015, the IRS instituted the De Minimus Safe Harbor. So, yes, it does supersede the prior law.

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Lili444
Level 2

Does De Minimus Safe Harbor election supersede my normal treatment of assets that cost under $200?

Thank you for clarifying that Coleen! 🙂 I will deduct the $50 under the De Minimus safe harbor election. 

I went ahead and reread the Tangible Property Regulations “Frequently asked questions”  Publication again and now it kinda seems to me like I shouldn’t be utilizing line 22, even for things like cleaning supplies and pens?! Maybe I’m interpreting it wrong but I came across the following question and answer on the “frequently asked questions” and it says you MUST include any qualifying materials and supplies if choosing to take the De Minimus election. 
can you help clarify this?? Thank you. 

https://www.irs.gov/businesses/small-businesses-self-employed/tangible-prop[product key removed]atio...

 

“ frequently asked questions”

“When can you deduct the costs of materials and supplies?

As under prior rules, you may deduct the costs of incidental and non-incidental materials and supplies in the following manner:

  • Incidental materials and supplies – If the materials and supplies are incidental, i.e., of minor or secondary importance, carried on hand without keeping a record of consumption, and no beginning and ending inventories are recorded, e.g., pens, paper, staplers, toner, trash baskets, then you deduct the materials and supplies costs in the taxable year in which the amounts are paid or incurred, provided taxable income is clearly reflected.
  • Non-incidental materials and supplies – If the materials and supplies are not incidental, then you deduct the materials and supplies costs in the taxable year in which the materials and supplies are first used or consumed in your operations. For example, deduct certain expendable spare parts in a trucking business for which records of consumption are kept and inventories are recorded in the taxable year the part is removed from your storage area and installed in one of your trucks. However, an otherwise deductible material or supply cost could be subject to capitalization under § 263(a) if you use the material or supply to improve property or under § 263A if you incorporate the material or supply into property you produce or acquire for resale.
  • Application with de minimis safe harborIf you elect to use the de minimis safe harbor and any materials and supplies also qualify for the safe harbor, you must deduct amounts paid for these materials or supplies under the safe harbor in the taxable year the amounts are paid or incurred. Such amounts are not treated as amounts paid for materials and supplies and may be deducted as business expenses in the taxable year they are paid or incurred. “

 

ColeenD3
Employee Tax Expert

Does De Minimus Safe Harbor election supersede my normal treatment of assets that cost under $200?

They are referring to non-incidental supplies, not pens, etc.

 

However, an otherwise deductible material or supply cost could be subject to capitalization under § 263(a) if you use the material or supply to improve property or under § 263A if you incorporate the material or supply into property you produce or acquire for resale.

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