Act Now! Get Your Safe-Harbor Expensing in Place

Written by Coach Janelle CPA on September 27, 2023

For 2024, you can elect the de minimis safe harbor to expense assets costing $2,500 or less ($5,000 with audited financial statements or similar) The term “safe harbor” means that the IRS will accept your expensing of the qualified assets if you properly abided by the safe harbor rules.

Here are three benefits of this safe harbor:

1. Safe-harbor expensing is superior to Section 179 expensing and depreciation because you don’t have the recapture period that can complicate your taxes.

2. Safe-harbor expensing simplifies your tax and business records because you don’t have the assets cluttering your books.

3. The safe harbor does not reduce your overall ceiling on Section 179 expensing.

Here’s how the safe harbor works. Say you are a small business that elects the $2,500 ceiling for safe-harbor expensing, and you buy two desks costing $2,100 each. On the invoice, you see the quantity “two” and the total cost of $4,200, plus sales tax of $378 and a $200 delivery and setup charge, for a total of $4,778.

Before this safe harbor, you would have capitalized each desk at $2,389 ($4,778 ÷ 2) and then either Section 179 expensed or depreciated it. You would have kept the desks in your depreciation schedule until you disposed of them.

With the safe harbor, you expense the desks as office supplies—your tax records life is easier.

To benefit from the safe harbor, you and your tax preparer (meaning us) do a two-step process. It works like this:

Step 1 - YOU. For safe harbor protection, you must have in place an accounting policy—at the beginning of the tax year—that requires expensing an amount of your choosing, up to the $2,500 or $5,000 limit. We can help you with this.

Step 2 - US. When we prepare your tax return, we make the election on your tax return for you to use safe harbor expensing. We do this with an election statement on your federal tax return and then file that tax return by the due date (including extensions). If you want to use this safe harbor in 2024, you need your accounting policy in place on January 1.

About Coach Janelle CPA

Sign Up To Our Weekly Newsletter

Get the latest tax planning tips content delivered straight to your inbox.

 All Your Information is Protected When You Sign Up

Check Out Some Of Our Latest Blog Post

HSAs for Business Owners

Written by Coach Janelle CPA on September 2, 2023

When enacted, the Affordable Care Act (ACA) eliminated most small-business health plans that reimbursed individually purchased health insurance. Consequently, many small business owners with fewer than 50 employees chose health savings accounts (HSAs) or opted to provide no health coverage at all....

Update on State Pass-Through Entity Taxes Beating the SALT

Written by Coach Janelle CPA on September 6, 2023

Here are some critical updates on the pass-through entity tax (PTET), which has recently become the rule in most states rather than the exception. The PTET enables owners of pass-through businesses, such as S corporations and multi-member LLCs, to navigate around the $10,000 annual limit on state and local taxes (SALT).

ICHRA Unleashed: Transforming Small Business Health Benefits

Written by Coach Janelle CPA on August 23, 2023

The individual coverage health reimbursement arrangement (ICHRA) allows businesses of all sizes, from large corporations to small businesses like yours, to reimburse employees for their personally purchased health insurance expenses...

The QSEHRA Health Plan

Written by Coach Janelle CPA on August 4, 2023

If you’re a small employer (fewer than 50 employees), you should consider the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) as a good way to help your employees with their medical expenses....

Strategic Insights for Employing Your Spouse

Written by Coach Janelle CPA on July 21, 2023

If you own your own business and operate as a proprietorship or partnership (wherein your spouse is not a partner), one of the smartest tax moves you can make is hiring your spouse to work as your employee. But the tax savings may be a mirage if you don’t pay your spouse the...

Shutting Down a C Corporation

Written by Coach Janelle CPA on July 13, 2023

There are several tax implications that you need to be aware of when shutting down a C corporation. Complete liquidation of a C corporation is when it ceases to be a going concern, winds up its affairs, pays its debts, and distributes its remaining assets to the shareholder(s). In tax terms, the corporation...

The Cleaning Lady and Your Home-Office Deduction

Written by Coach Janelle CPA on July 6, 2023

If you have an office in your home that qualifies for the home-office deduction and you employ a cleaning lady who maintains both your home and your home office, there are a couple of tax considerations to keep in mind.

Claim Your 2020 COVID Sick and Family Leave Credits Today

Written by Coach Janelle CPA on June 28, 2023

You may have overlooked potential COVID-19 sick and family leave tax credits on your 2020 tax return. You might be eligible for up to $15,110 in tax credits, and the good news is that it’s not too late to claim them.

Act Now to Qualify for Your 2020 and 2021 ERC Money

Written by Coach Janelle CPA on June 21, 2023

It’s 2023, but you still have the chance to qualify for the employee retention credit (ERC) for the 2020 and 2021 calendar years. This credit can potentially help you recover a significant amount of money.

One Ugly Rule for S Corp Owners Deducting Health Insurance

Written by Coach Janelle CPA on June 8, 2023

When your S corporation covers or reimburses your more-than-2-percent-shareholder-employee health insurance expenses, it classifies the payments as box 1 W-2 wages but not box 3 or box 5 wages.

Share Us On Social Media