Friday, August 1, 2014


The Repair Regulations put in effect on January 1, 2014, contain several elections and safe harbors.  This article will focus on the de minimis safe harbor election.

Under the de minimis safe harbor election, an eligible taxpayer may generally deduct amounts paid for tangible personal property, where the per item or the per invoice amount does not exceed $5,000.  An eligible taxpayer is one that has an applicable financial statement, a written capitalization policy as of the first day of the tax year, and expenses amounts on its applicable financial statements consistent with the written policy.  

An applicable financial statement (AFS) is a financial statement provided to the Securities and Exchange Commission, or an audited financial statement used for creditors or other non-tax purposes.  In determining the per invoice or the per item amount with the $5,000 limitation in mind, it is important to note that transaction and other costs included in the same invoice as the item are also included in and allocated to the cost of the item.  

For taxpayers without an AFS, the rules and election still apply, however the dollar threshold is reduced to $500.  

It is important to note any materials and supplies purchased that fit within the de minimis safe harbor parameters are treated as expensed under this election and not under the rules for materials and supplies. The safe harbor must be applied to all amounts paid.  Please visit:

The de minimis safe harbor election is an annual, irrevocable election.  It is made by attaching a statement to the taxpayer's timely filed (including extensions) original tax return.  Please contact a KOS advisor today if you would like to discuss how this safe harbor may apply to you or the next steps needed to obtain available tax benefits under the new Regulations.

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