All Forum Posts by: Oleg Kio

@Andy D. The way I read the IRS rules - https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations - these safe harbors (de minimis and small taxpayer) are meant as an exception to the capitalization rules. While in the past you would have been required to capitalize those windows since they are an improvement, using the de minimis safe harbor you get to expense them in the same year instead, as long as each item is under $2,500 and you file the de minimis safe harbor election.

We may be addressing slightly different things here. The way I understand it, this can't be used for improvements prior to the unit being ready for rent (maybe this is what you meant?) But once it's ready for rent (or you have a renter in there) you should be able to use the DMSH.

Brandon Hall has a couple of nice articles about it - https://www.biggerpockets.com/blogs/6032/41669-understanding-the-safe-harbor-rules-and-keeping-money-in-your-pocket and https://www.biggerpockets.com/renewsblog/2015/11/27/breaking-new-tax-change-that-can-save-thousands-for-real-estate-investors/

@Justin Fox I agree, I think that was the intent of the new regulations, to simplify (and possibly encourage more spending which should help the economy.) I've taken the election in the past and certainly plan to do so this year.

As @Account Closed mentioned, that $2,500 limit is per item as well so if you replace 20 windows in a house and the total invoice is $12,000, I believe you can still expense the whole thing as long as the invoice clearly states that there were 20 windows.

Amanda Han wrote an article about it - https://www.biggerpockets.com/renewsblog/2015/11/27/breaking-new-tax-change-that-can-save-thousands-for-real-estate-investors/ - and I think Brandon Hall wrote some as well (for some reason I can't seem to tag them.)

Justin, from what I understood reading the De Minimis regulations, you don't need anything special to use the safe harbor (no CAP, SRA, etc.), just have to file the election with your return every year. If you elect to use it, the maximum amount is $2,500 (there isn't a $500 anymore, that was in the pre-2016 version.)

This page covers it in good detail - https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations 

I'll second @Andy W , I believe you can expense using the de minimis harbor election. As long as it's under $2,500 per item, you can expense it in full the same year. Search Bigger Pockets for "de minimis" articles and check out the IRS site.

https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations