Experienced Tax
Accountant – The safe harbor threshold for small
businesses deducting certain capital items has increased from $500 to $2,500.
The new $2,500 threshold takes effect starting with tax year 2016. In addition,
the IRS will provide audit protection to eligible businesses by not challenging
use of the new $2,500 threshold in tax years prior to 2016.
The change affects businesses that do not maintain an applicable
financial statement (audited financial statement). It applies to amounts spent
to acquire, produce or improve tangible property that would normally qualify as
a capital item.
For taxpayers with an applicable financial statement, the de minimis or
small-dollar threshold remains $5,000.
The new $2,500 threshold applies to any such item substantiated by an
invoice. Small businesses will be able to immediately deduct many expenditures
that would otherwise need to be spread over a period of years through annual
depreciation deductions, simplifying paperwork and recordkeeping requirements.
During the February comment period, the IRS received more than 150
letters from businesses and their representatives suggesting an increase in the
threshold. Commenters noted that the existing $500 threshold was too low to
effectively reduce the administrative burden on small business. Moreover, the
cost of many commonly expensed items such as tablet-style personal computers,
smartphones, and machinery and equipment parts typically surpass the $500
threshold.
As before, businesses can still claim otherwise deductible repair and
maintenance costs, even if they exceed the $2,500 threshold.
Please call if you have any questions or would like additional details
about this change.
Need help with tax filing in 2016? Help is just a phone call away! I look forward to hearing from you.
Click this link to view our YouTube video http://youtu.be/KfO0_kmz7qc
Amare
Berhie, Senior Tax Accountant
(651)
300-4777, (612)424-1540, (651) 621-5777
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