Author Topic: What is the New "De Minimus Safe Harbor" Rule?  (Read 2589 times)

Fred Tracy

  • 5 O'Clock Shadow
  • *
  • Posts: 29
What is the New "De Minimus Safe Harbor" Rule?
« on: August 04, 2014, 10:52:39 AM »
Hello all, I am a new landlord and keep reading about the new regulation passed by the IRS for 2014 and beyond. It is covered here:

If I understand it correctly, you can basically deduct (instead of depreciate) any item that costs under $500. So this means I could deduct pretty much anything I buy for my rental house beyond the really expensive stuff. This is awesome! No more worrying about whether or not replacing a water heater or range hood actually qualifies as an improvement vs a repair (provided it cost under $500..).

But I am skeptical because I can't find very much information on the internet about it. People are still arguing over whether or not any old $100 item is a repair or improvement. Maybe this is because it's so new?

Can anyone here that is more well-versed than I at tax laws regarding rental properties chime in? Is it as simple as it seems, i.e just deduct any item that is under $500 as a repair?


  • Bristles
  • ***
  • Posts: 495
Re: What is the New "De Minimus Safe Harbor" Rule?
« Reply #1 on: August 04, 2014, 11:02:36 PM »
This rule is a boon for small landlords.

As I understand it (I am not a professional; do your own research), when

1) The individual expense is less than $500
and 2) Your total repair expenses for the year are less than $10,000

you can deduct the expense as a repair rather than depreciating it as a capital expense.

You will need to write a "company policy" that expenses of less than $500 are to be treated as repairs rather than capital expenses. You will also need to include a "de minimis" election with your tax return.

The idea is to save the time and trouble of figuring out whether an expense is repair/maintenance or capital in cases where the overall effect on taxes owed is small.

Don't abuse it.

Companies that are large enough to have their finances done by an accounting firm have had a safe harbor like this for several years. Theirs works for larger dollar amounts.