By Jake Hutchison
The Internal Revenue Service raised the de minimis safe harbor amount for non-AFS (applicable financial statement) taxpayers for taxable years beginning on or after January 1, 2016 to $2,500 from the prior $500 amount. The change applies to amounts spent to acquire, produce, or improve tangible property that would normally qualify as a capital item. Small businesses will be able to immediately deduct many expenditures that would otherwise need to be spread over a period of years through annual depreciation deductions.
If you decide to update your accounting policy, not to exceed the new safe harbor of $2,500, then we advise you to do so before January 1, 2016.
For taxpayers with an applicable financial statement, the de minimis threshold remains $5,000.
Please contact our office for help updating your accounting policy along with any questions on the new change.