IRS Increases De Minimis Safe Harbor Threshold

The IRS issued Notice 2015-82 on November 24, 2015, stating that taxpayers without an applicable financial statement can elect to deduct purchases of tangible property up to $2,500 as a current expense.  The previous threshold amount issued with the tangible property regulations on August 14, 2014 was $500.  The threshold amount is applied per invoice or per item as substantiated by the invoice.  The election is made annually on a timely filed tax return (including extensions).

Since the final regulations were issued, the $500 threshold amount has come under scrutiny for being too low compared to the $5,000 threshold for taxpayers with an applicable financial statement (generally an audited financial statement). The AICPA has been a strong advocate to raise the de minimis amount to $2,500 issuing a comment letter to the IRS on October 8, 2014.  The AICPA argued that the $500 threshold was not providing much help to taxpayers trying to comply with the administrative burden of the complex tangible property regulations.  Taxpayers currently are permitted to deduct amounts in excess of the $500 de minimis threshold, but they have the burden of proof of establishing that the deduction is a clear reflection of income. The burden of proof can be subjective and difficult to apply and is an interpretation of facts and circumstances.  Raising the threshold amount reduces reliance on the reflection of income test and brings the amount more in line with many taxpayer capitalization policies.

The new de minimis amount applies to tax years beginning on or after January 1, 2016. However, the IRS stated in Notice 2015-82 that it will not raise the issue of deducting a higher amount for tax years beginning before January 1, 2016 during an audit examination or for any case under appeals or before the Tax Court.

Contact us with questions regarding IRS Notice 2015-82 and visit our tax blog to read more articles on related topics

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2021 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
Ohio’s New Budget
Supreme Court Ruled State Request for Donor Information Unconstitutional
Applying for Federal Income Tax Exemption?
IRS Experiencing Delays: Exempt Organizations are Encouraged to e-file Forms 8868 and 990-ez
Ohio Update on the Unemployment Benefits Exclusion for Taxpayers Who Filed Prior to the Enactment of the American Rescue Plan Act
LIFO Liquidation Relief for Automotive Dealers
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us
Map of Pittsburgh Office

One PPG Place, Suite 1700
Pittsburgh, PA 15222

[email protected]
p:412.261.3644     f:412.261.4876

Map of Columbus Office

65 East State Street, Suite 2000
Columbus, OH 43215

[email protected]
p:614.621.4060     f:614.621.4062

Map of Washington Office
Washington, D.C.

1660 International Drive, Suite 600
McLean, VA 22102

[email protected]

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.