Handbook / Business deductions

The de minimis safe harbor election for the 2026 tax year

Tax-year note: Tax information on this page applies to the 2026 tax year (returns filed in 2027), from IRS pages checked in November 2026. Figures and dates are labelled with their tax year where they appear. Check current IRS pages before you rely on them.

When a business buys a laptop, a tool or a piece of furniture, the general rule is that items with a useful life beyond the year are capitalised and depreciated over time. That creates bookkeeping work for low-cost items. The de minimis safe harbor election offers a simpler path: for qualifying amounts, you deduct the cost in the year you pay it. This guide covers how it works for the 2026 tax year, based on the IRS's tangible property regulations guidance.

What the safe harbor does

The IRS explains that the de minimis safe harbor election allows a business to deduct amounts paid to acquire or produce tangible property, up to certain limits, rather than capitalising them. Instead of tracking each small item on a depreciation schedule, you treat qualifying purchases as current expenses.

The limits

The IRS sets two levels, depending on whether you have an applicable financial statement (AFS), such as audited financial statements:

• without an AFS: up to $2,500 per invoice, or per item as substantiated by invoice
• with an AFS: up to $5,000 per invoice or per item

The lower limit was $500 for tax years beginning before January 1, 2016. Most small businesses and freelancers do not have an AFS, so the $2,500 level is the one that usually applies.

The limit is per item, not per year

The IRS explains that these amounts are limits for determining whether the de minimis safe harbor applies to an expenditure; they are not a ceiling on the total amount you can deduct. If you buy several qualifying items in a year, each one is tested separately against the per-item or per-invoice limit.

What it does not cover

The safe harbor does not apply to:

• inventory
• land
• certain rotable, temporary and standby emergency spare parts

Other items may still be eligible for other treatments, such as depreciation or Section 179.

Making the election

The IRS explains that the de minimis safe harbor is an annual election, not a change in accounting method, so you do not file Form 3115. To make it, you attach a statement to your timely filed original federal tax return, including extensions, for the year the costs are paid. The statement should be titled "Section 1.263(a)-1(f) de minimis safe harbor election" and include:

• your name
• your address
• your taxpayer identification number
• a statement that you are making the de minimis safe harbor election

All or nothing for the year

If you make the election for a year, you must apply it to all expenditures that qualify for it that year. You cannot pick and choose.

Accounting procedures

Businesses with an AFS need written accounting procedures in place at the beginning of the year. The IRS explains that businesses without an AFS are not required to have written procedures, but must expense these amounts on their books and records in line with a consistent accounting procedure or policy that exists at the beginning of the tax year. A short written policy is still good practice, because it makes your approach consistent and easy to explain.

Examples in words

• A freelancer buys a printer for an amount below the $2,500 limit on a single invoice. With the election, the printer can be deducted as an expense rather than depreciated.
• A contractor buys several hand tools on one invoice. Each item is tested against the limit, as substantiated by the invoice.
• A shop owner buys stock to resell. That is inventory, so the safe harbor does not apply.

Where it appears on Schedule C

Amounts deducted under the safe harbor are reported with your other business expenses on Schedule C, typically in the category that matches the item, such as supplies or office expense. See Schedule C.

Records

Keep invoices showing what you bought and the cost of each item. The per-item test depends on what the invoice shows. See receipt tracking. Business purchases must also meet the general ordinary and necessary test.

When to get help

If you have larger purchases, repairs that might be improvements, or an AFS, the tangible property rules have more detail. Consider a tax professional.

For the 2026 tax year, the de minimis safe harbor lets you deduct qualifying tangible property costing up to $2,500 per invoice or item, or $5,000 with an AFS; it excludes inventory and land, is elected each year with a statement on a timely return and applies to all qualifying amounts.