In an effort to further reduce taxpayers' administrative burden, the IRS has raised the de minimis safe harbor for capital expenditures from $500 to $2,500. The change comes as a direct result of feedback received during a public comment period during which the Treasury Department and IRS formally requested comments on whether the safe harbor limit should be raised, and if so by how much.
The de minimis safe harbor is intended as a minimum threshold under which all eligible amounts that are expensed for book purposes are also considered deductible for tax purposes. Notice 2015-82 raises the de minimis safe harbor amount for taxpayers without an applicable financial statement to $2,500 from the $500 previously allowed in the regulations. An applicable financial statement is defined as a financial statement required to be filed with the SEC; a certified audited financial statement; or a financial statement required by a federal or state agency other than the SEC or IRS.
The increased $2,500 safe harbor amount is effective for taxable years beginning on or after Jan. 1, 2016. However, for years prior to 2016, to the extent the taxpayer otherwise meets the requirements of Treasury Regulations - including the requirement that the taxpayer have accounting procedures at the beginning of the taxable year which treat the item as an expense for non-tax purposes- the IRS will not challenge the de minimis election if it does not exceed $2,500.