De Minimis Safe Harbor for Tangible Property refers to a tax provision that allows businesses to deduct certain expenditures for tangible property without having to capitalize and depreciate them.
Under this safe harbor, businesses can treat amounts paid for tangible property as deductible expenses if they meet specific criteria. For example, under IRS regulations, a business can elect to apply this safe harbor if the amount is $2,500 or less per item or invoice for businesses without an applicable financial statement (AFS), or $5,000 or less for those with an AFS. This simplifies record-keeping and allows for immediate deductions of smaller purchases, reducing taxable income in the year the expense is incurred.
It’s important for businesses to document their election to use the safe harbor and to maintain adequate records supporting the amounts expensed under this provision.
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