In a recent letter, the American Institute of Certified Public Accountants (AICPA) commended the IRS for requesting input on increasing the De Minimis Safe Harbor limit for taxpayers without applicable financial statements (AFS) and provided a recommendation. The safe harbor generally allows taxpayers with AFS (which usually means audited financial statements) to immediately deduct $5,000 per item of tangible property. However for taxpayers without AFS, the limit is only $500.
In its letter, the AICPA recommended increasing the threshold from $500 to $2,500 for taxpayers without AFS. The AICPA recognized that the intent of the $500 De Minimis Safe Harbor election is to reduce the administrative burden of applying the complex set of capitalization rules for business taxpayers without an AFS (e.g., small business taxpayers). However, the AICPA had concerns that the $500 threshold is too low to effectively achieve this underlying objective.
For assistance with the De Minimis Safe Harbor, the Repair Regulations, or the other tax planning ideas, please don't hesitate to contact a KBKG representative. Our team is your resource and we are here to help.
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