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What can I expense or depreciate with the business safe harbor election?

SOLVEDby TurboTax888Updated January 11, 2022

When you purchase items for your business, you can either deduct the full cost of the expense at once, or you can deduct the cost over multiple years (depreciation).

The De Minimis Safe Harbor election lets you deduct the full cost of items worth $2,500 or less, instead of depreciating. You can also use the Safe Harbor Election for Small Taxpayers to expense the cost of improvements to business buildings if you qualify.

These elections are available for Schedule C businesses, rentals, farms, and farm rentals.

For instructions on claiming the De Minimis Safe Harbor Election in TurboTax, select your product:

Items for your business that cost $2,500 or less can be taken as an expense this year and don’t have to be depreciated over time.

Note: If you are not using TurboTax Self-Employed already, you will be prompted to upgrade to this product. You must be using TurboTax Self-Employed to make these elections in our online software.

  1. Open your tax return in TurboTax
  2. Search for business expenses in the search bar and select the Jump to link in the results
  3. On the Did you have any self-employment income? screen, answer Yes, and answer the questions about your business until you reach the What kind of expenses did you have for [business]? Screen. Select Assets, and Continue
    • If you land on the Your 2021 self-employed work summary screen, either select Edit beside the work you wish to add assets for, or select Add a new line of work to add a new business. Then you can step through the interview until you get to the Here’s your [business] info screen
    • Scroll down to the Add expenses for this work option. Select Assets under Less Common Expenses, then Continue. This will return you to the Here’s your [business] info screen
  4. On the Here's your [business] info screen, select Start or Update next to the Assets category, under Expenses
  5. Answer Yes to the question Did you buy, or do you already own, any depreciable assets related to this business (other than vehicles)?
  6. On the next screen, answer Yes to the question Did you buy any items that each cost $2,500 or less in 2021?
  7. Answer the questions on the following screens. On the screen Now, let’s review each item you bought:
    • If you select Every item I bought costs $2,500 or less, you will be taken back to the Your [business] info screen, where you can enter each item you would like to expense in the Expenses section
    • If you select Some items I bought cost $2,500 or less and some cost above $2,500, you will be asked about building improvements on the next screen
    • If you made building improvements for your business in 2021, answer Yes, and follow the instructions below to make the Safe Harbor Election for Small Taxpayers
    • If you didn’t make any building improvements, answer No, and continue through the questionnaire to return to the Your [business] info screen. We will generate the De Minimis Safe Harbor Election form and add it to your tax return
  1. Log in to the software and open your tax return
  2. Search for business expenses in the search bar and select the Jump to link in the results
    • If you land on the Business Summary screen, select Edit next to the business you’re entering assets for, or Add another business to enter a new business
  3. Answer the questions about your business until you get to the Business Expenses screen
  4. Select Start or Update next to Assets and depreciation
  5. Answer Yes to the question Did you buy or own any assets, other than vehicles, in this business?
  6. On the next screen, answer Yes to the question Did you buy any items that each cost $2,500 or less in 2021?
  7. Answer the questions on the following screens. On the screen Now, let’s review each item you bought:
    • If you select Every item I bought costs $2,500 or less, you will be taken back to the Business Expenses screen, where you can enter each item you would like to expense in the All other expenses section
    • If you select Some items I bought cost $2,500 or less and some cost above $2,500, you will be asked about building improvements on the next screen
    • If you made building improvements for your business in 2021, answer Yes, and follow the instructions below to make the Safe Harbor Election for Small Taxpayers
    • If you didn’t make any building improvements, answer No, and continue through the questionnaire to return to the Business expenses screen. We will generate the De Minimis Safe Harbor Election form and add it to your tax return

For instructions on claiming the Safe Harbor Election for Small Taxpayers, select your product:

  1. Follow steps 1-7 above for taking the De Minimis Safe Harbor election in TurboTax Online
  2. On the screen Now, let’s review each item you bought, select Some items I bought cost $2,500 or less and some cost above $2,500
  3. Answer Yes on the screen Did you make improvements to a building you used for this business in 2021?
  4. On the next screen, answer Yes to both questions if the situation described applies to you, and Continue
  5. Enter a description for each of the properties you made improvements to in 2021
  6. Continue through the interview until you return to the Your [business] info screen
  7. We will generate the Safe Harbor Election for Small Taxpayers form and add it to your tax return, along with the description of your property

Note: If you are not using TurboTax Self-Employed already, you will be prompted to upgrade to this product. You must be using TurboTax Self-Employed to make these elections in our online software.

  1. Follow steps 1-7 above for taking the De Minimis Safe Harbor election in TurboTax
  2. On the screen Now, let’s review each item you bought, select Some items I bought cost $2,500 or less and some cost above $2,500
  3. Answer Yes on the screen Did you make improvements to a building you used for this business in 2021?
  4. On the next screen, answer Yes to both questions if the situation described applies to you, and Continue
  5. Enter a description for each of the properties you made improvements to in 2021
  6. Continue through the interview until you return to the Business expenses screen
  7. We will generate the Safe Harbor Election for Small Taxpayers form and add it to your tax return, along with the description of your property

Why would I want to take these elections?

These elections let you deduct your items as expenses instead of depreciating them over the life of the item. One-time expenses typically reduce your income by a larger amount than depreciating an asset over multiple years. This means you could get a bigger refund.

If you take these elections, they will apply to all your businesses, rental properties, or farms.

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