How to Apply the De Minimis Safe Harbor Rule for Fixed Assets (2025 Guide)
The IRS De Minimis Safe Harbor Election allows businesses to expense low-cost purchases immediately instead of capitalizing and depreciating them over time. Why does this matter? For small businesses, this means:
• Simpler bookkeeping
• Faster write-offs
• Stronger cash flow at tax time
👉 Looking for a quick breakdown? Watch our 5-minute video explainer here.
What are fixed assets?
Fixed assets are long-term, tangible assets used in your business for more than a year. Examples include:
• Computers, laptops, tablets
• Office furniture and fixtures
• Machinery and tools
• Vehicles
Unlike cash or inventory (which are current assets), fixed assets normally require capitalization and depreciation. The de minimis rule lets you bypass this step for qualifying low-dollar purchases.
What is capitalization?
Under Generally Accepted Accounting Principles (GAAP), fixed assets are typically capitalized—meaning you record them on your balance sheet and then expense them over time through depreciation.
The business then needs to include the fixed asset as part of its capital every year that asset is being used, while adjusting for its depreciation. You’re able to write off the depreciated cost in your taxes each year. This process is called capitalization.
Example: Buy a $1,200 laptop. Normally, you’d depreciate it across 3–5 years. But with the de minimis safe harbor election, you can expense the entire cost immediately if it meets IRS thresholds.
IRS Thresholds for the De Minimis Rule
The IRS sets limits on what qualifies:
• $2,500 maximum per invoice or item (without audited financials)
• $5,000 maximum per invoice or item (with an Applicable Financial Statement / AFS)
This applies to ordinary business expenses like office chairs, printers, software subscriptions (when classified as tangible property), and small equipment purchases.
How to Apply the De Minimis Election
To use the rule, you must:
1. Keep invoices/receipts proving costs fall under the threshold
2. Attach an election statement to your timely filed tax return each year
3. Maintain consistent records to avoid audit risks
The IRS does not allow “blanket elections” across years, you must make the election annually.
De Minimis vs. Section 179 vs. Bonus Depreciation
Rule: De Minimis Safe Harbor
Deduction Limit: $2,500 (or $5,000 w/ AFS) per item
Applies To: Small purchases, tangible property
Filing Requirement: Election statement each year
Rule: Section 179
Deduction Limit: Up to $1.22M (2025)
Applies To: Larger equipment, vehicles, property
Filing Requirement: Must elect on return
Rule: Bonus Depreciation
Deduction Limit: 60% (phasing out after 2025)
Applies To: Qualifying property
Filing Requirement: Automatic but subject to limits
Pro Tip: Many small businesses use both De Minimis and Section 179 depending on purchase size.
FAQ on De Minimis Safe Harbor Rule:
What is the De Minimis Safe Harbor rule?
It allows businesses to expense certain low-cost items immediately instead of capitalizing them as fixed assets.
What’s the IRS threshold?
$2,500 per invoice/item, or $5,000 if your business has an Applicable Financial Statement.
What qualifies under the rule?
Office supplies, laptops, tablets, printers, small tools, and similar purchases under the threshold.
How do I make the election?
Attach a De Minimis Safe Harbor Election Statement to your tax return each year.
Does it apply to all businesses?
Yes, but the threshold depends on whether your business has audited financials.
Common Mistakes to Avoid
• Forgetting to file the election statement with your return
• Applying the rule to non-qualifying assets
• Not keeping proper receipts and documentation
Get Help Applying the Safe Harbor Rule:
Unsure if your purchases qualify? Certum Solutions can help. We specialize in small business accounting, tax compliance, and bookkeeping strategies that maximize deductions.