The De Minimis Safe Harbor for the Purchase of Tangible Property Increased for 2016

Person calculating property tax on tangible property on a calculator with documents.


The Tangible Property Regulations that were issued recently, had provided for a safe harbor of $500 in expensing of personal property, in the year of purchase. Just recently, the IRS in Notice 2015-82 increased the limit to $2,500 per item. This was after receiving substantial feedback from the public as to the need for an increment of the amount, considering that very few items cost $500 or less, such as computers etc, thereby increasing the burden of record keeping.

For Businesses with an applicable financial statement (e.g. audited financial statements) the safe harbor remains at $5,000, as in the previous year.

The new Safe Harbor amount of $2,500 will be applicable for tax years beginning on or after January 1, 2016.  However, the IRS has indicated it will not question this higher amount for returns, under audit for tax years beginning after December 31, 2011 and ending before January 1, 2016.

This is a welcome change to the earlier imposition of the $500 threshold, as it will provide taxpayers with the impetus to purchase items providing them with instant deductions in the year of purchase, and furthermore, eases the need for keeping records related to the depreciation of such assets in future years. However, records on these assets will continue to be neccessary for personal property tax purposes.

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