IRS Raises Tangible Property Expense Threshold

The Internal Revenue Service in November simplified the paperwork and record-keeping requirements for small businesses by raising from $500 to $2,500 the safe harbor threshold for deducting certain capital items.

The change affects businesses that do not maintain an applicable financial statement (audited financial statement). It applies to amounts spent to acquire, produce or improve tangible property that would normally qualify as a capital item, according to the IRS.

The new threshold applies to items substantiated by an invoice. Small businesses now will be able to immediately deduct expenditures that would otherwise need to be spread over a period of years through annual depreciation deductions.

The new $2,500 threshold takes effect starting with tax year 2016. S