The de minimis safe harbor election under Treasury Regulation Section 1.263(a)-1(f) allows eligible business owners and real estate investors to deduct the cost of certain tangible property purchases instead of capitalizing and depreciating those items over time.
In simple terms, this election lets you treat qualifying lower-cost business purchases as current-year expenses, making recordkeeping and tax reporting much easier.
What Is the De Minimis Safe Harbor Election?
The de minimis safe harbor election is an annual election that must be made each year you want to use it.
If you qualify, you may generally deduct:
- Up to $2,500 per invoice or per item if you do not have an Applicable Financial Statement (AFS)
- Up to $5,000 per invoice or per item if you do have an Applicable Financial Statement (AFS)
The threshold is applied based on the invoice amount or the individual item cost shown on the invoice.
Examples may include:
- Computers and office equipment
- Tools
- Small business equipment
- Furniture
- Other qualifying tangible property used in your business
Instead of depreciating these items over several years, you can deduct the entire qualifying cost in the year it is purchased.
How Do I Make the Election?
To claim the de minimis safe harbor election, you must attach an election statement to your timely filed federal income tax return, including extensions.
The election must be made each year you wish to use it.
Required Statement Title
The statement must be titled: "Section 1.263(a)-1(f) de minimis safe harbor election"
Information Required in the Statement
Your statement must include:
- Your name
- Your address
- Your Social Security Number (SSN) or Taxpayer Identification Number (TIN)
- A statement that you are making the de minimis safe harbor election under Section 1.263(a)-1(f)
For partnerships and S corporations, the election is made by the entity rather than by the individual partners or shareholders.
For consolidated corporate returns, the election applies separately to each member of the consolidated group.
Can I E-File My Return With This Election?
Because the election requires an attachment that isn't supported by the program, you'll generally need to print and mail your return with the required statement attached.
Be sure to include the election statement when mailing your return to the IRS.
How Do I Paper File My Return?
To print your return:
- Select Review/Summary from the navigation menu.
- Select Print or View Return to access the PDF version of your return.
- Print the return and attach your de minimis safe harbor election statement.
- Mail the completed return to the appropriate IRS filing address.
The IRS mailing address depends on your state of residence and whether you're including a payment. Always verify you're using the correct IRS mailing address before sending your return. For the IRS mailing address based on the state in which you live, please click here.
If you're filing a state return, the state mailing instructions are typically included with the printed state forms.
Important Reminders
Before mailing your return, ensure your election statement includes all required information:
- Your name
- Your address
- Your SSN or TIN
- A statement that you're making the de minimis safe harbor election under Section 1.263(a)-1(f)
- The exact title: "Section 1.263(a)-1(f) de minimis safe harbor election"
Incomplete statements may cause the election to be considered invalid.
Why Would I Use This Election?
The de minimis safe harbor election can simplify tax reporting by allowing you to deduct qualifying purchases immediately rather than tracking depreciation over multiple years.
For many small business owners, this means:
- Less recordkeeping
- Simpler tax reporting
- Faster recovery of business costs
However, whether making the election is beneficial depends on your specific situation and the assets purchased during the year.