What it allows
The safe harbor for small taxpayers lets qualifying landlords expense amounts paid for repairs, maintenance, and improvements on a building, rather than capitalizing them — as long as the total stays under an annual cap tied to the building's value.
The limits
You qualify if your average annual gross receipts are $10 million or less, and the building's unadjusted basis is $1 million or less. The total you expense under the safe harbor per building for the year cannot exceed the lesser of 2% of the building's unadjusted basis or $10,000.
How to use it
It is an annual election attached to a timely filed return, applied building by building. It is especially useful for single-family and small multifamily owners who make modest annual improvements that would otherwise be stuck on a long depreciation schedule.
Frequently asked questions
What is the dollar cap?
Per building per year, the lesser of 2% of the building's unadjusted basis or $10,000.
Who qualifies?
Taxpayers with average annual gross receipts of $10 million or less, for buildings with unadjusted basis of $1 million or less.
Is it the same as the de minimis safe harbor?
No. The de minimis safe harbor is a per-item rule for property purchases; this one is a per-building cap for repairs and improvements.
Sources
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.