De Minimis Safe Harbor.
In plain English
The de minimis safe harbor is an IRS election that lets you treat inexpensive purchases as regular expenses you deduct immediately, rather than as assets you have to depreciate over years. It exists so you do not have to track depreciation on small things like a $200 office chair or a $400 monitor. There is a per-item (or per-invoice) dollar threshold, and the higher threshold applies only if you have an applicable financial statement, which most small businesses do not. You make the election each year by attaching a statement to your tax return.
01Why it matters
It saves you the headache of depreciating dozens of small purchases, and it lets you take the full deduction the same year you spend the money, which simplifies your books.
02The math, step by step
You buy three desk chairs at $250 each. As of the 2016 update, the threshold for a business without an applicable financial statement is $2,500 per item, so each chair is well under it, and you deduct all $750 this year as supplies instead of depreciating each chair (businesses with an applicable financial statement use a higher $5,000 per-item threshold).
03What this is NOT
Section 179 expenses big assets you would otherwise depreciate, and it has limits tied to your income. The de minimis safe harbor is for small, low-cost items and just keeps them off the depreciation schedule entirely. They solve different problems.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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