Question

De Minimis or Small Taxpayer Safe Harbor Election - Not Reported on Form 3115

Accepted Answer

De Minimis Safe Harbor

If you bought property or an asset for your business this tax year, this election lets you deduct the full cost of that property or asset now (expense), instead of getting a partial deduction each year for the remaining life of the property or asset (depreciation). This may help you get a bigger deduction this year. To be eligible for this election, the property or asset must have cost $5,000 or less (or $2,500 or less if you don't have financial documentation).

Learn more about de minimus safe harbor election from IRS.gov.

Small Taxpayer Safe Harbor

This election lets you expense certain repair, maintenance, and improvement costs for your building property. You can expense either $10,000 of repair, maintenance, and improvement costs or 2% of the cost of the building property. This may help you get a bigger tax refund this year because you don't have to depreciate these costs over several years.

Learn more about the small taxpayer safe harbor election from IRS.gov.

Making the Election

A qualifying taxpayer elects the small taxpayer safe harbor annually by including a statement in its timely filed, original tax return for the year of the election. The statement must be titled "Section 1.263(a)-3(h) Safe Harbor Election for Small Taxpayers" and include the taxpayer's name, address, taxpayer identification number, description of each eligible building property to which the taxpayer is applying the election, the amounts paid for repairs, maintenance, improvements and similar activities performed on the eligible building(s) described above qualify under the safe harbor provided in Reg. section 1.263(a)-3(h)(1).

In the case of an S corporation or a partnership, the entity makes the election (not the shareholders or partners). Once made, the election is generally irrevocable and may not be changed through the filing of an application for change in accounting method. See FAQ De Minimis and Small Taxpayer Safe Harbor Elections (Forms 1065, 1120, or 1120-S) NOT REPORTED on Form 3115 for details.

To enter the election for a 1040 return, follow the steps below.

Schedule C

Add or edit the Schedule C topic. Detailed steps are available in our Schedule C - Entering Sole Proprietorship in Program FAQ. On the screen Do any of these uncommon situations apply to your [__] work?, select either:

I want to make the de minimis safe harbor election
I want to make the small taxpayer safe harbor election.

Schedule E

Add or edit the Schedule E topic. Detailed steps are available in our Schedule E - Entering Rental Property in Program FAQ. On the screen Repair and maintenance election options, check either:

De minimis safe harbor election
Small taxpayer safe harbor election

Schedule F

Add or edit the Schedule F topic. Detailed steps are available in our Schedule F - Entering Farm Income in Program FAQ. On the screen Farm Income - Expenses, click Yes. Then on the screen Farm Income - Repair Regulation Elections, check either:

De minimis safe harbor election
Small taxpayer safe harbor election

Form 4835

Add or edit the Schedule E topic. Detailed steps are available in our Form 4835 - Entering in Program FAQ. On the screen Farm Rental - Expenses, click Yes. Then on the screen Farm Rental - Repair Regulation Elections, check either:

De minimis safe harbor election
Small taxpayer safe harbor election

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