De Minimis Safe Harbor
The de minimis safe harbor lets a business expense any item or invoice of up to $2,500, or $5,000 with an audited financial statement, instead of capitalizing and depreciating it. It takes one election statement with the return each year. The payoff is a full deduction in the year of purchase and a fixed-asset list with dozens fewer lines.
Reviewed by Ebot Mbi, CPA, EA · Last reviewed October 9, 2026
Who it fits
- Businesses that buy many lower-cost items: computers, phones, furniture, tools
- Practices and firms that want a simple, consistent rule for their books
- Businesses that would otherwise track small assets on a depreciation schedule
- Owners who want small purchases settled at the time of purchase, not at audit
Who it's not for
- Items above $2,500 each, which follow the regular capitalization rules (bonus depreciation or §179 may still apply)
- Inventory and land, which are excluded
- Businesses that capitalize such items on their own books, since the tax treatment must follow the books
How it works
Under the capitalization regulations, a business may deduct amounts paid for tangible property that cost $2,500 or less per invoice, or per item as shown on the invoice. A business with an audited financial statement may use $5,000.
The business must treat these items as expenses on its own books under an accounting policy in place at the start of the year. A business with an audited statement needs a written policy. Others should still put it in writing.
The election is made each year by attaching a statement to a timely filed return, including extensions. It applies to all qualifying purchases that year; you cannot pick and choose.
Delivery, installation and similar costs on the same invoice are included in the per-item amount.
With 100% bonus depreciation now permanent for property acquired after January 19, 2025, the deduction amount may be similar either way. The difference is simplicity and certainty: no depreciation schedule entries, no tracking, and no question of whether an item was a repair or an asset.
Illustrative example
Illustrative: a professional firm taxed at 24% buys 12 laptops at $2,100 each and 20 chairs at $450 each in 2026. Each item is listed separately on its invoice.
- Laptops: 12 x $2,100 = $25,200, each under $2,500
- Chairs: 20 x $450 = $9,000
- Total expensed under the safe harbor: $25,200 + $9,000 = $34,200
- Federal tax value in 2026: $34,200 x 24% = $8,208
- Assets added to the depreciation schedule: 0, instead of 32
About $8,208 of tax saved in the year of purchase, with no fixed-asset tracking for 32 items.
The rules
| Rule | Citation |
|---|---|
| A business may elect to deduct tangible property costing up to the de minimis limit per invoice or item. | Treas. Reg. §1.263(a)-1(f) |
| The limit is $2,500 per invoice or item for businesses without an applicable financial statement. | IRS Notice 2015-82 |
| The limit is $5,000 for businesses with an applicable (audited) financial statement and written policy. | Treas. Reg. §1.263(a)-1(f)(1)(i) |
| The election is made annually by a statement attached to a timely filed original return. | Treas. Reg. §1.263(a)-1(f)(5) |
Watch-outs
- No statement, no election. It must be on the timely filed original return each year.
- Splitting a single asset across several invoices to get under $2,500 does not work.
- Your books must match. If your bookkeeper capitalizes a $1,800 item, the safe harbor does not apply to it.
- Personal-use items do not become deductible because they are cheap.
What we do
We set your written capitalization policy, align your bookkeeping to it, and attach the election statement to every return. At year-end we review fixed-asset additions to move qualifying items out of the depreciation schedule.
Questions
Is $2,500 per item or per invoice?
Either. If the invoice lists each item with its cost, the limit applies per item. If not, it applies per invoice.
Do I need an audit to use $2,500?
No. The $2,500 level is for businesses without an audited financial statement. The $5,000 level requires one.
Does Texas follow this for franchise tax?
Texas franchise tax has its own cost-of-goods and compensation rules. We look at the federal treatment and the Texas computation separately.