Repair Regulations: De minis safe harbor election (Part 3)

OVER THE LAST two months, I have gone over the fundamentals of the new tangible repair regulations, which apply to taxable years beginning on or after January 1, 2014. Though an overview is helpful when it comes to understanding the basics, there are many more elements of the repair regulations to consider, including the elections that are available to taxpayers.

Taxpayers may elect to apply a de minis safe harbor, which takes away the stress of determining if small-dollar expenses should be capitalized or deducted. The amount you are able to deduct depends on whether your business has CPA audited financial statements. If you have audited financial statements, you can deduct amounts paid to acquire or produce tangible property, such as furniture, computers, and equipment, up to $5,000 per invoice or item. If you do not have audited financial statements, the deduction limit is significantly smaller. You will be able to deduct up to $500 per invoice or item. One cautionary note is that counties that assess tangible property tax don’t have a safe harbor amount. Items that may be expensed for income tax purposes still may be considered taxable fixed assets for tangible property taxes. Unfortunately, this causes companies to keep two sets of fixed assets listings.

To learn more about this election and to determine if it is right for your business, consult your tax adviser. Next month, we will discuss more elections available to taxpayers, including the safe harbor election for small businesses and the election to capitalize repair and maintenance costs.



BIO: Steven Crisman is the managing partner of Cross, Fernandez & Riley, LLP’s (C/F/R) Winter Haven office and leads its Agriculture Practice Group. He primarily serves the agriculture, manufacturing, warehousing, and distribution industries. He has specific experience with citrus growers, cattle ranchers, citrus and other horticultural nurseries, citrus harvesters and other support industries as well as watermelon, blueberry and other growers. In addition, Steve provides comprehensive tax and estate planning, attestation and business succession planning services.

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