De Minimis Safe Harbor for Deducting Repair Expenses Increased to $2,500

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De Minimis Safe Harbor for Deducting Repair Expenses Increased to $2,500

Posted by Kim Chen on December 8th, 2015

Under the Tangible Property Regulations (TPRs), businesses must generally capitalize amounts paid to acquire or produce a unit of property. However, businesses can make a safe-harbor election to currently expense a de minimis amount of such expenses. The de minimis amount for a business without a Applicable Financial Statement (AFS) (basically, an audited financial statement or one required to be filed by the SEC) is $500 [Reg. 1.263(a)-1(f)(1)(ii)(D) ]. [ Editor’s Note: This amount, which applies to many small businesses, has long been criticized as not nearly large enough.] The IRS has now increased the de minimis safe-harbor amount for a business without an AFS to $2,500, effective for costs incurred in tax years beginning after 2015. However, the IRS will not challenge this issue in pre-2016 years if the other requirements of Reg. 1.263(a)-1(f)(1)(ii) are met. IRS Notice 2015-82, 2015-50 IRB and News Release IR 2015-133 .