@yelkenli First you may want to not take the safe harbor election so that you won't be subject to SE taxes on the sale of those assets in the future as they will be then subject to ordinary income.
I don't work for TT but, they believe that you have to have a signed declaration with your return and why you need to print and mail it and this continues in 2021.
Again, I do not agree that there is any reason to take it any longer now that the IRS has expanded section 179 and the bonus depreciation. You may want to rethink taking the deminimis safe harbor election. Talk to a tax advisor.
Hope this is helpful:
There are three federal income tax reasons why you should use 100 percent bonus depreciation instead of the de minimis safe harbor:
- When you sell property expensed under the de minimis safe harbor, the proceeds are ordinary income and, if you file your business return on Schedule C of your Form 1040, are subject to the self-employment tax. When you sell property for which you claimed 100 percent bonus depreciation, the proceeds are ordinary income to the extent of depreciation recapture, and any excess proceeds over the original basis are Section 1231 gain (generally capital gain). The sale of an asset that you expensed using bonus depreciation does not trigger the self-employment tax.
- If you use the de minimis safe harbor, you have to attach the required election statement to your tax return or you lose your expensing.
- For purposes of the new 20 percent tax deduction under Section 199A, depreciable property might add to your qualified business income if your taxable income is equal to or over the $157,500 (single) or $315,000 (married, filing jointly) thresholds. Property for which you use bonus depreciation adds to your qualified property and can add to your Section 199A tax deduction. De minimis expensing makes the property disappear from the property records and cannot add to your Section 199A tax deduction.
Then of course there is the option to section 179 treatment.
- Businesses can take a total deduction of $1,050,000, which is $10,000 higher than in 2020.
- Businesses’ total equipment purchase limit is $2.62 million (increased from $2.59 million in 2020).
- Businesses can apply 100% bonus depreciation on both new and used equipment for the entirety of 2021.
As long as your spending is at or below that limit of $2.62 million, your purchases will qualify. But the deduction begins to phase out dollar-for-dollar after that limit is met and will discontinue at the $3.67 million mark.
So, be mindful of that $2.62 million ceiling. If you’re getting close to it, consider postponing any additional purchases until 2022 so you don’t lose your eligibility.
To remove safe harbor elections:
First Change your assets answer. The program will not delete information it feels is important. You must have marked safe harbor as you were going through the rental. Return to the rental and uncheck that you are using the safe harbor method. Then you can delete the worksheet.
In TurboTax Online, delete by going to the left menu, Tax Tools. Select Tools and Delete a Form. Scroll to find Section 1.263(a)-1(f) De Minimis Safe Harbor Election and Delete Form.
If you are in TurboTax CD/Download, go to forms mode and double click Open Form. In the search box, type election, scroll down to select De Minimis Safe Harbor Election. When it opens, uncheck the box.
This election is made annually. To change it from year to year does not require Form 3115 Change of Accounting Method. Without it, capital assets $2,500 and less will be depreciated over their useful lives instead of expensed.
**I don't work for TT. Just trying to help. All the best.
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