De minimis safe harbor

With the election, a camera or laptop that costs no more than the limit is deducted in the year you pay for it. The cost goes on Schedule C with your other business expenses. Without the election, gear that lasts beyond the year is generally capitalized, then recovered through depreciation or a Section 179 deduction. Items of $200 or less can often be deducted as supplies, in the year you first use them.

Each year’s election is a statement you attach to that year’s original return, filed on time, including extensions. The statement is titled “Section 1.263(a)-1(f) de minimis safe harbor election” and gives your name, address and taxpayer ID.

The election covers every qualifying item that year. You cannot make it on an amended return or revoke it. You also need accounting procedures, in place when the year starts, that expense such items, and your books must expense them too.

The limit applies per invoice, or per item when the invoice shows each item’s cost, and never to the year’s total. Inventory and land never qualify, and neither do certain spare parts. The regulation’s text still says $500. Notice 2015-82 raised the limit to $2,500 for tax years beginning on or after January 1, 2016.