IRS Change May Allow Your Business To Deduct Hundreds Of Thousands of Dollars

$2,500 Items Can Now Be Immediately Expensed, Which Had to Be Capitalized Before Ruling

The Internal Revenue Service is assisting qualifying businesses this year with a change to the deduction amount for business expenses from $500 to $2,500 each. The change applies to amounts spent by businesses to acquire, produce, or improve tangible property that would normally qualify as capital items. Businesses can now immediately deduct expenditures that would otherwise need to be spread out over a period of years through annual depreciation deductions. Items might include personal computers, smart phones, machinery and equipment, and building repairs and improvements.
For example, if a company needs to purchase 5 computers for $1,500 each for its employees, each computer will be deducted since it falls under the $2,500 amount limit. In order to take advantage of the new IRS safe harbor threshold, the invoice must reflect each computer listed as a single line item at $1,500, instead of being listed as one overall item totaling at $7,500.
The new $2,500 threshold can be applied per item, as long as it is substantiated by an invoice. For clients that have audited financial statements, the limit is increased to $5,000 per item.
There has to be a written accounting policy in place and an election has to be made on the tax return. There are also other rules that have to be followed. We are happy to discuss this further with our clients and look forward to speaking with you.