Safe Harbor Election for Small Taxpayers (SHST) De Minimis Safe Harbor Election (DMSH) I know the threshold for SHST is $10,000 for rental improvements and $2,500 for a single item under DMSH.Can I use both SHST and DMSH?Do regular rental repairs, such as a leaky faucet replacement, count toward the SHST threshold or not?Is the example below correct?HVAC Replacement -improvment($9,500) → Can be expensed under SHST.Refrigerator Replacement ($2,000) → Can be expensed separately under DMSH since it's under $2,500 per item.Regular Rental Repairs ($3,000) → Normally deductible as an expense (repairs are not considered capital improvements).

Yes, you can use both in a single tax year if you qualify. No, regular repairs is an expense and does not have to be depreciated and therefore the DeMinimis Safe Harbor (DMSH) does not come into play. Examples response: You do meet the specific rule for taking the Safe Harbor Election for Small Taxpayers for building capital improvements. Based on this rule you can take the $9,500 as an expense under this safe harbor. Rules for this method for capital improvements: Your gross receipts, including all your other income, are $10,000,000 or less. Your eligible building has an unadjusted basis of $1,000,000 or less. The cost of all repairs, maintenance and improvements is less than or equal to the smallest of these limits: 2% of the unadjusted basis of your building or $10,000 Yes, the refrigerator replacement falls under the DMSH expense election since the cost is less than $2,500. Yes, the rental repairs are expensed as repairs.

TurboTax

File with experts
File your taxes
Experts at your fingertips

An expert helps with your taxes, or does them for you
TurboTax Expert Full Service

TurboTax Expert Assist

TurboTax Self-Employed
Prior year taxes
File myself
File myself
Do it yourself

We'll guide you step-by-step
TurboTax Do It Yourself

TurboTax Self-Employed

TurboTax Desktop
TurboTax Free

Activate your product

Prior year taxes
Business
Business
Business taxes

Get your T2 corporate return done right, your way
TurboTax Business

TurboTax Business Desktop
Tax situations
Tax situations
Tax situations

Find extra guidance for your big life moves
For investors

For 25 and younger

For self-employed

For new to Canada

For life changes
Resources
Resources
Resources

Explore tax tools, get tips, and read reviews
Personal income tax calculator

RRSP savings calculator

Learning hub

TurboTax support (FAQ)

TurboTax community
Pricing

Community

manbeing

Employee

Solved

Please help me understand the Safe Harbor Election for Small Taxpayers (SHST) and the De Minimis Safe Harbor Election (DMSH).

Forum|Forum|1 year ago
February 17, 2025
1 reply
0 views

Safe Harbor Election for Small Taxpayers (SHST)

De Minimis Safe Harbor Election (DMSH)

I know the threshold for SHST is $10,000 for rental improvements and $2,500 for a single item under DMSH.

Can I use both SHST and DMSH?
Do regular rental repairs, such as a leaky faucet replacement, count toward the SHST threshold or not?

Is the example below correct?

HVAC Replacement -improvment($9,500) → Can be expensed under SHST.
Refrigerator Replacement ($2,000) → Can be expensed separately under DMSH since it's under $2,500 per item.
Regular Rental Repairs ($3,000) → Normally deductible as an expense (repairs are not considered capital improvements).

Best answer by DianeW777

Yes, you can use both in a single tax year if you qualify. No, regular repairs is an expense and does not have to be depreciated and therefore the DeMinimis Safe Harbor (DMSH) does not come into play.

Examples response:

You do meet the specific rule for taking the Safe Harbor Election for Small Taxpayers for building capital improvements. Based on this rule you can take the $9,500 as an expense under this safe harbor.
- Rules for this method for capital improvements:
  - Your gross receipts, including all your other income, are $10,000,000 or less.
  - Your eligible building has an unadjusted basis of $1,000,000 or less.
  - The cost of all repairs, maintenance and improvements is less than or equal to the smallest of these limits:
    - 2% of the unadjusted basis of your building or
    - $10,000
Yes, the refrigerator replacement falls under the DMSH expense election since the cost is less than $2,500.
Yes, the rental repairs are expensed as repairs.

DianeW777Answer

Examples response:

You do meet the specific rule for taking the Safe Harbor Election for Small Taxpayers for building capital improvements. Based on this rule you can take the $9,500 as an expense under this safe harbor.
- Rules for this method for capital improvements:
  - Your gross receipts, including all your other income, are $10,000,000 or less.
  - Your eligible building has an unadjusted basis of $1,000,000 or less.
  - The cost of all repairs, maintenance and improvements is less than or equal to the smallest of these limits:
    - 2% of the unadjusted basis of your building or
    - $10,000
Yes, the refrigerator replacement falls under the DMSH expense election since the cost is less than $2,500.
Yes, the rental repairs are expensed as repairs.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

manbeingAuthor

Employee

Thank you so much @DianeW777

If I have multiple rental properties, each rental property is reported individually in terms of income, expense and assets depreciation,etc. Does the threshold of Safe Harbor Election for Small Taxpayers, $10,000 can be applied to each individual rental property? or All rental properties share one $10,000 threshold?

Thanks!

DianeW777

The IRS seems to apply this to the tax year.

If all the safe harbor requirements are met, an interest in rental real estate will be treated as a single trade or business. It may consist of an interest in a single property or interests in multiple properties if you chose to group them together.
IRS Tangible Property -FAQs

If you have chosen to group properties then it could be considered across all properties.

If you add similar rental properties to your inventory and you have elected to group properties for the safe harbor, the newly acquired properties are automatically part of the group. Once you elect to group properties you must continue to group in future years.

@manbeing

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"