When we perform bookkeeping and prepare tax returns, our clients often ask us if we should depreciate the equipment over 5 years or simply write off in the year the equipment is in use.
The answer is it depends on the cost of the equipment has economic value over 1 year.
Your next question is what the threshold of the cost?
Reg. Section 1.263(a)-1(f) de minimis safe harbor rule gives you the answer!
The amount is $2,500 per invoice (or per item in an invoice). In other words, you are allowed to write off instead of tracking it by depreciation of the amount of the equipment cost is less than $2,500. This is also superior than section 179 which requires recapture the deduction if you can’t use the equipment for 5 years.
Be careful after reading this article, the write off of $2,500 is not an automatic election. Your CPA has to make such election of adopting sec 1.263(a)-1(f) in order to enjoy this tax benefit.
Contact us if you want to learn more about it.
Leave a Reply