Tangible Property De Minimis Safe Harbor: Is $500 too Low?

April 24, 2014

Since September 2013 when the Internal Revenue Service (IRS) announced the final tangible property regulations (TD 9636), members of the American Institute of CPAs (AICPA) have been expressing concern that the $500 safe harbor threshold set for the immediate deduction of tangible property is too low.

The IRS established the $500 threshold for unaudited taxpayers because it does not have sufficient assurance that they are following the required accounting policies and “accordingly, that the taxpayer is using a reasonable, consistent methodology that clearly reflects its income.”

However, the regulations provide a higher threshold ($5,000) for taxpayers with an audited financial statement if they have an accounting policy (a written accounting policy for the $5,000 threshold) which allows such expensing.

The AICPA is gathering information from members to achieve a solution that can ease taxpayer compliance and address the IRS’s concerns.

Please help by letting us know what you think the threshold should be, what type of assurance could suffice to raise the threshold and how and why your clients are challenged.  Click here by April 30 to share your opinion to help us develop recommendations for the IRS.

For more information about the tax treatment of expenditures related to tangible property and the AICPA’s efforts in this area, visit the AICPA’s resource page on the topic.