IRS raises the safe harbor property expensing threshold to $2500
On November 24th IRS issued Notice 2015-82 which raises the safe harbor property expensing threshold to $2500. In simple words, property and equipment costing less than $2500 can be directly expensed in the current tax year and need not be capitalized and depreciated over its economic life. The old threshold was $500 and was often criticized as inadequately low, imposing burdening paperwork and record-keeping requirements on many small businesses.
The depreciation schedules for tangible properties can easily become nightmare for the small taxpayers and their tax professionals. Handling even a single property may require maintaining more than 4 depreciation schedules to comply with various federal regulations, state regulation, AMT federal and state differences, book differences, section 179 expensing, temporary bonus depreciation treatments, recaptures on disposition and have a framework and process to reconcile between all these and their effects on the tax payers property basis and other tax attributes.
The new threshold goes in effect with tax year 2016. Additionally, the IRS is promising to not challenge taxpayers if the new higher threshold is used for previous years.
Details on the release can be found here.