IRS Revises Safe Harbor Repair Regulations

 

CopierIn November the IRS increased the amount your business can expense versus capitalize from $500 to $2,500. This change impacts businesses that do not publish applicable financial statements. The new rule takes effect starting in 2016, but there is audit protection for using this new limit in prior years.

What this means

This new rule is typically referred to as the safe harbor de minimis limit. Now small businesses may expense versus capitalize purchases of equipment that cost less than $2,500 and not have it challenged by the IRS. Without this change, small businesses would need to capitalize these purchases and then recapture the cost using depreciation over many years.

The irony is that with the recent extension of bonus depreciation through 2019, many small businesses would already expense many of these purchases. If this change could impact recent purchases of your business please ask for a review of your situation.