Howard, LLP

Howard Tax Insights: De Minimis Tangible Property Increase

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Dallas, Texas, December 2015 – Recently, the IRS announced a significant change to the de minimis threshold under the Tangible Property Regulations that went into effect during 2014.  Under the original rule, taxpayers could elect to currently deduct expenses for the purchase of tangible property that would otherwise have to be capitalized, as long as the total value was less than $500 per invoice or item.  For taxpayers with an Applicable Financial Statement, this limit was set at $5,000.

Many taxpayers objected to the $500 de minimis threshold arguing that it was too low, and proposed increasing the level.  After receiving more than 150 comments, the IRS has agreed to make a change.

Under the new rule, taxpayers will be able to deduct up to $2,500 per invoice or item.  The new de minimis amount applies to costs for tax years beginning on or after January 1, 2016, but the IRS will not raise the issue of a higher amount during an audit for earlier tax years.

If you have any questions on how the new de minimis level applies to you, or need assistance drafting a written capitalization policy to comply with the regulations, we encourage you to contact the Howard team to discuss what options are available to you.