IRS increases de minimis safe harbor


On November 24, 2015, the IRS issued notice 2015-82, increasing from $ 500 to $ 2,500 the amount which can be expensed for tangible property for taxpayers without audited financial statement. According to regulations, a taxpayer can deduct/expense the cost of the tangible personal property, if they meet certain requirements of the project.

This notice is effective for fiscal years beginning on or after January 1, 2016, the IRS did not make it retrocative, as such, the taxpayer can not take advantage of the annual $ 2,500 limit for tax years which began prior to January 2016.

The limit for taxpayers with audited financial statements remains at $ 5,000.

Observation:  This relief may not be helpful if a taxpayer had tailored its procedures to the old $500 limit.  While the old rule did not require using $500 as the maximum limit on the procedures, rather just granting no automatic protection on exam to any items in excess of that amount, some taxpayers nevertheless adopted policies that tied directly to the $500 limit.  If a taxpayer has such a policy in place currently the taxpayer will not be able to take advantage of the higher limit until it first changes its policy and second begins a new tax year.

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