12/16/2015
Raising the Bottom Line
Tangible Property Limit Raised by the IRS
Posted by Leonard Rus on Fri, Dec 04, 2015 @ 12:37 PM
Expense Threshold Increased from $500 to $2,500
The de minimis safe harbor limit for small business taxpayers without an applicable financial statement will be raised from $500 to $2,500 beginning in 2016. Introduced by the IRS in late 2014, the tangible property rules limited deductions for tangible property to $500, sparking complaint in the small business community with concerns that most expensed property exceeded the threshold.
What Changes Have Been Made?
As of 2016, up to $2,500 paid for tangible property such as materials, supplies, equipment and machinery, may be deducted from the cost of the item per invoice for taxpayers without an applicable financial statement. These changes to the tangible property rules have raised the deduction amount by $2,000.
The new de minimis amount applies to costs for tax years on or after January 1, 2016, but the IRS will not raise the issue of a higher amount during an audit for earlier years. Early implementation during 2015 is recommended.
Read more about the threshold changes here.
Does the Limit Increase Affect You?
These changes are applicable to all business owners expensing tangible property, though are expected to affect small business owners in particular. Any taxpayer using the safe harbor election without an applicable financial statement such as an audit, review or compilation should anticipate the increased deduction amount in 2016.
