De Minimis Safe Harbor Election: Small Business Guide [Video + FAQs]
What is the De Minimis Safe Harbor Election? The IRS created the De Minimis Safe Harbor Election to help businesses expense certain low-cost purchases immediately, instead of capitalizing and depreciating them over time.
For small businesses, this rule can simplify bookkeeping, speed up deductions, and save money at tax time.
IRS Thresholds You Should Know
The IRS has clear rules on what qualifies:
• $2,500 or less per item or invoice (without audited financials)
• $5,000 or less if your business has an applicable financial statement (AFS)
• Applies to tangible property such as office furniture, laptops, tools, and small equipment
In this short video, Katie Bunschoten explains how the rule works in practice and why it matters for small businesses. Watch on YouTube or press play below.
Why It Matters for Small Businesses
• Saves time – fewer depreciation schedules to track
• Boosts cash flow – faster tax write-offs
• Simplifies reporting – easier year-end bookkeeping
How to Use the De Minimis Election
To take advantage of this rule, businesses must:
1. Identify qualifying assets under the $2,500 or $5,000 threshold
2. Attach an election statement to their tax return each year
3. Keep records (invoices, receipts) in case of an IRS audit
Common Mistakes to Avoid
• Forgetting to file the election statement with your tax return
• Applying the rule to non-qualifying assets
• Not reconciling invoices with fixed asset records
Frequently Asked Questions
What is the difference between the De Minimis Election and Section 179?
Section 179 allows larger deductions on qualifying property but has limits; the de minimis election is only for lower-cost items.
Can I use this rule every year?
Yes — but you must elect it annually by attaching a statement to your tax return.
Do I need an accountant to apply this?
While you can file it yourself, working with an advisor helps ensure compliance and maximizes deductions.
What are common mistakes to avoid?"
Forgetting to attach the election statement, applying the rule to non-qualifying assets, or failing to keep proper documentation.
Related Resources
📖 Full Guide: How to Apply the De Minimis Rule for Fixed Assets
💡 Small Business Accounting Software Comparison
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