Internal Revenue Service and U.S. Treasury Issue Final Capitalization Regulations


In September 2013, the IRS and U.S. Treasury issued final capitalization regulations. These revised regulations, under specified circumstances, permit business taxpayers to make safe harbor elections that would enable them to deduct expenditures that might otherwise need to be capitalized. The focus of this alert is on the de minimis safe harbor election and the requirement for taxpayers to have a written accounting policy in place not later than the first day of their tax year – January 1, 2014 for calendar year clients.

What amount is considered de minimis?

The amount considered de minimis under the de minimis safe harbor election depends upon whether the taxpayer has written accounting procedures ("accounting policies") in place and, if so, whether the taxpayer has an applicable financial statement. As long as business taxpayers have written accounting policies in place at the beginning of the tax year, the de minimis amount may be as high as $5,000 for those with an applicable financial statement and as high as $500 for those without an applicable financial statement. Those taxpayers without written accounting policies in place will still be permitted to characterize tangible property as materials or supplies for items costing $200 or less.


Tags: IRS


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