# What is the de minimis safe harbor for small purchases?

The de minimis safe harbor is a yearly IRS election that lets a business deduct small purchases of tangible property, such as tools or equipment, instead of capitalizing and depreciating them. Without an applicable financial statement the limit is $2,500 per item or invoice; with one, $5,000. The $2,500 limit has applied to tax years beginning on or after January 1, 2016, including 2025. A ProfitDrawer bookkeeping spreadsheet records each purchase with a receipt link.

How to use it (IRS tangible property regulations page and Publication 334, 2025):

1. Expense the items in your books under a consistent policy in place at the start of the tax year. Without an applicable financial statement, the policy does not have to be written.
2. Attach a statement titled "Section 1.263(a)-1(f) de minimis safe harbor election" to your timely filed original return (including extensions), with your name, address, taxpayer identification number and a statement that you are making the election.
3. Report the amounts as other expenses in Part V of Schedule C.

Limits and exceptions:

- It does not cover inventory or land.
- Once elected, it applies to all purchases that meet its criteria that year.
- Amounts over the limit are not forced into capitalization by the election; they follow the normal rules.
- It is an annual election, not a change in accounting method, so you do not file Form 3115.

An applicable financial statement includes audited statements with a CPA report and statements required by a government agency other than the IRS. General information, not tax advice.

- Source: [IRS: Tangible property final regulations](https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations)
- Updated: 2026-10-29
- Published: 2026-10-29
- Category: Small business taxes
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