De Minimis Safe Harbor Limit Increases to $2,500 to Help Small Businesses

The IRS recently raised the de minimis safe harbor limit for taxpayers without an applicable financial statement (AFS).  AFS include audited financial statements and certain financial statements reported to governmental agencies.  Starting in 2016, the threshold for deducting certain invoiced capital items will raise from $500 to $2,500.

For taxpayers with an AFS, the de minimis threshold will remain $5,000. The increase will help many small businesses who do not receive a financial statement audit to immediately deduct more eligible tangible property, which will simplify paperwork and recordkeeping requirements.

With uncertainty in the air surrounding Section 179 expensing and Bonus Depreciation, the increase in the de minimis safe harbor is a welcome relief to small businesses who could have been left with a reduced ability to expense certain items purchased for their business.

More information on this change can be found in Notice 2015-82.