$500 safe harbor increased to $2,500 for taxpayers

[Steven Hamilton II]

Good news everyone, the $500 de minimis safe harbor limit was increased to $2,500 for taxpayers who place property in service, that are NOT required to produce an audited financial statement(applicable finance statement).

Effective for January 1st 2016 they are adjusting audit procedures to ignore items below this threshold provided provided you have a receipt.

This means you will not have to depreciable items below this threshold as long as you elect that safe harbor.

Of course it was released this morning, after I prepared for my presentation this evening.

This represents HUGE $$$ savings and time savings.

IRS Notice Notice 2015-82This Notice is effective for costs incurred during taxable years beginning on or after January 1, 2016.

[Daria B.]

Originally posted by @Brandon Hall:

@Daria B. @Steven Hamilton II we cannot take deductions for improvements simply because they are less than $2,500. A bathroom, kitchen, or basement remodel will not qualify for the De Minimis election as a whole, rather individual components and personal property will qualify for the election. 

As @Susan Robb correctly stated, property that qualifies for De Minimis cannot be considered an improvement to the unit of property (UOP) which generally limits the deduction to tangible personal property and components of tangible property (read: spare parts).  

For example, carpet is generally considered personal property and may qualify for the election. However, laminate or wood glued to the flooring is not personal property but rather an improvement to the building structure. 

The best thing for anyone to do prior to making this election is to discuss with a qualified professional. 

The following code supports Susan's and my remarks:

§ 1.263(a)-1(f)(1)(i) Except as otherwise provided in paragraph (f)(2) of this section, a taxpayer electing to apply the de minimis safe harbor under this paragraph (f) may not capitalize under § 1.263(a)-2(d)(1) or § 1.263(a)-3(d) any amount paid in the taxable year for the acquisition or production of a unit of tangible property nor treat as a material or supply under § 1.162-3(a) any amount paid in the taxable year for tangible property if the amount specified under this paragraph (f)(1) meets the requirements of paragraph (f)(1)(i) or (f)(1)(ii) of this section. But see section 263A and the regulations under section 263A, which require taxpayers to capitalize the direct and allocable indirect costs of property produced by the taxpayer (for example, property improved by the taxpayer) and property acquired for resale.

§ 1.263A-2(a)(1)(i) In general. For purposes of section 263A, produce includes the following: construct, build, install, manufacture, develop, improve, create, raise, or grow.

So, that was far reaching and the example of the washer and dryer was more appropriate as an expense. The remodel then looks to be, because it adds to the basis of the property and is an improvement, is depreciated. :( I'm so glad I have a CPA. :)