The $2,500 per-item rule
Under the de minimis safe harbor, you can expense tangible property costing up to $2,500 per invoice or per item (as substantiated by the invoice) rather than capitalizing and depreciating it. For most landlords without audited financials, the limit is $2,500 per item; it is $5,000 if you have an applicable financial statement.
How to elect it
The safe harbor is an annual election. You make it by attaching a statement to a timely filed return each year. You should also have a written accounting policy in place at the start of the year treating such amounts as expenses.
Why it helps cash flow
Instead of depreciating a $2,000 appliance over years, you deduct it now. That front-loads the write-off, simplifies your depreciation schedule, and avoids tracking many small assets. It also reduces future depreciation recapture on those items when you sell.
Frequently asked questions
What is the dollar limit?
Generally $2,500 per invoice or item for taxpayers without an applicable financial statement; $5,000 if you have one.
Do I have to elect it each year?
Yes. It is an annual election attached to a timely filed return, ideally paired with a written expensing policy.
Does it apply to improvements?
It applies to items under the threshold. Larger improvements are still capitalized, though other safe harbors may help.
Sources
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.