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

SOLVEDby TurboTax918Updated 3 weeks ago

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). 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.

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:

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 Did you have any expenses for your work in 2022? screen. Answer Yes to continue
  4. When you reach the expenses you know you had screen, select Assets, then Continue
    • If you land on the Your 2022 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
  5. On the Here's your [business] info screen, select Start or Update next to the Assets category, under Expenses
  6. Answer Yes to the question Did you buy, or do you already own, any depreciable assets related to this business (other than vehicles)?
  7. On the next screen, answer Yes to the question Did you buy any items that each cost $2,500 or less in 2022?
  8. 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 2022, 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 2022?
  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- screen, where you can enter each item you would like to expense in the Other Miscellaneous 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 2022, 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 screen. We will generate the De Minimis Safe Harbor Election form and add it to your tax return

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