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Depreciation commercial garage door

sffdib
Level 4

Can I use the de minims safe harbor rule for assets under $2500 for commercial garage door and is the code in ProSeries Professional? 

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TaxGuyBill
Level 14

As Susan must noted, you misread that.

Pretty much all items that are useful for less than 12 months are expensed anyways.  So the election is mostly for items with a useful life of over 12 months.

The main 'catch' or obstacle is if the taxpayer had a specified amount set at the beginning of the year.

 

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TaxGuyBill
Level 14

If the taxpayer qualifies to use the amount for the De Minimis election, yes. 

You would just enter it as an expense; don't enter it as an asset.

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sffdib
Level 4

Any special qualifying requirements other than cost of under $2,500? I do have 4 items under $2,500 and gross income is around $100k. 

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TaxGuyBill
Level 14

Despite popular belief, the Regulations don't just say $2500 or less is deductible.

It says at the "beginning" of the year, the taxpayer needs to have "accounting procedures" that state they will expense/deduct items $xxx or less for their "book" purposes (and that $xxx amount could be less than $2500).

With that being said, most people's "books" are their checking account, and everything they buy they consider an expense/deduction.  So on that front, they would probably qualify.

However, the Regulation also says "specified dollar amount".  So the taxpayers need to have pre-set that "specified dollar amount" at the beginning of the year.

I realize the IRS would never question that matter (the "accounting procedures" are not required to be written, but I make my clients write it out with a signature and date), but technically, things need to be set up in advance with a "specified dollar amount".

 

(A) The taxpayer does not have an applicable financial statement (as defined in paragraph (f)(4) of this section);

(B) The taxpayer has at the beginning of the taxable year accounting procedures treating as an expense for non-tax purposes

(1) Amounts paid for property costing less than a specified dollar amount; or

(2) Amounts paid for property with an economic useful life (as defined in §1.162-3(c)(4)) of 12 months or less;

(C) The taxpayer treats the amount paid for the property as an expense on its books and records in accordance with these accounting procedures; and

(D) The amount paid for the property does not exceed $500 [it was changed to $2500] per invoice (or per item as substantiated by the invoice) or other amount as identified in published guidance in the Federal Register or in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)(b) of this chapter).

sffdib
Level 4

Thank you TaxGuyBill. Great information. Based on item number 2 in your reply, it would not work in my client's case. These are commercial garage doors, and tools sheds with useful life of over 12 months.  

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sjrcpa
Level 15

It's 1 or 2


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TaxGuyBill
Level 14

As Susan must noted, you misread that.

Pretty much all items that are useful for less than 12 months are expensed anyways.  So the election is mostly for items with a useful life of over 12 months.

The main 'catch' or obstacle is if the taxpayer had a specified amount set at the beginning of the year.

 

View solution in original post

sffdib
Level 4

Thank you.