Where to include De Minimis Safe Harbor expenses on Schedule E.

Question

Wondering whether there are any specific requirements or best practices as to where to put the actual expenses on Schedule E. Whether to:

(a) Roll all De Minimis expenses in with other expenses as part of the Repairs amount on Schedule E.

(b) Use the 'Other Expenses' line.

If (b), is it required to give a description of the actual items (i.e. what the purchase/repair/improvement was), to just write 'Total De Minimis Amount', or something else?

Thank you

ColeenD3 · Accepted Answer

That's great, I appreciate the clarification. Not to contradict you, but in between posting and seeing your reply I came across this verbiage in Pub 527:

De minimis safe harbor for tangible property.

If you elect this de minimis safe harbor for your rental activity for the tax year, you aren’t required to capitalize the de minimis costs of acquiring or producing certain real and tangible personal property and may deduct these amounts as rental expenses on line 19 of Schedule E. For more information on electing and using the de minimis safe harbor for tangible property, see chapter 1 of Pub. 535.

Just thought I would put that out there in case of any comment, but I don't take this to mean you have to use Line 19. Having let this sink in some more, I guess in many cases the item in question doesn't fit one of the standard expense categories otherwise you probably wouldn't have had the dilemma as to whether to depreciate or take the safe harbor in the first place (hence Line 19). But if it does, it does i.e. I understand that something that would seem to a lay person to be a repair, but that IRS rules would regard as a depreciable 'restoration', can now just go into the Repair line under the safe harbor.

No jacuzzis but in case you are bored, I have a semi-related question to clarify whether there is any issue if the physical invoice amount itself is >$2500 but is on a joint owned property i.e. the expense is the 50% share of the invoice which would be for an amount under the limit:

https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/2500-de-minimis-safe-harbor-for-joi[product key removed]rty/00/2132524

Thanks again.

Show the Safe Harbor as a Miscellaneous Expense with the explanation of De Minimus Safe Harbor. It is not a repair and would not be included with repairs. It is either a purchased asset or an improvement asset. Repairs included with a major improvement become part of the improvement.

In terms of your other question, physical invoice amount itself is >$2500 but is on a joint owned property i.e. the expense is the 50% share of the invoice which would be for an amount under the limit, here are the rules you need to meet to take this election:

You don't have an applicable financial statement (most people don't).
You have a consistent process for how you record expenses and assets.
You record these items as expenses on your books/records.
The cost of each item as shown on your receipt is $2,500 or less.

RayW7 · Answer

You should attach a statement titled "Section 1.263(a)-1(f) de minimis safe harbor election" to the timely filed original federal tax return including extensions for the taxable year in which the de minimis amounts are paid. The statement should include your name, address, and Taxpayer Identification Number, as well as a statement that you are making the de minimis safe harbor election. Under the election, you must apply the de minimis safe harbor to all expenditures meeting the criteria for the election in the taxable year. For more information, see When and how do you make an election provided under the final tangibles regulations?

De Minimis Safe Harbor Election

This election for items $2,500 or less is called the De Minimis Safe Harbor Election. This election is an option you can take each year that lets you write off items $2,500 or less as expenses instead of assets. Expenses typically reduce your income by a larger amount than depreciating an asset over multiple years does. This means you could get a bigger refund.

If you decide to take this option, a form called De Minimis Safe Harbor Election will show up in your tax return. This election will apply to all your businesses, rental properties or farms.

Here are the rules you need to meet to take this election:

You don't have an applicable financial statement (most people don't).
You have a consistent process for how you record expenses and assets.
You record these items as expenses on your books/records.
The cost of each item as shown on your receipt is $2,500 or less.

How to enter in TurboTax-

Click on Federal Taxes > Wages & Income [In TT Home & Biz: Business > Continue > I'll choose what to work on]
In the Rental Properties and Royalties section, click the Start/Update button.
If you have already started adding information about your business, you will be asked if you want to review your rental and royalty information. Click the Yes box.
When you come to the Rental and Royalty Summary screen. Click on the Edit box next to the property.
If you haven't already started adding information about the property, continue through the screens to enter the needed information.
You will now be on the Review Your [property name] Rental Summary screen.
In the Assets/Depreciation section, click on the Start/Update box.
When you come to the screen, Did you buy any items that each cost $2,500 or less in 2020? mark the Yes button and click Continue.
On the screen Let's see if you qualify to deduct these items as expenses, mark both of the Yes buttons and click Continue.
On the Now, let's review each item you bought screen, mark whether all your new assets cost $2500 or less.
If you mark that every item cost $2,500 or less, you will be brought to the Rental Summary screen. You have elected the De Minimis Safe Harbor provision. Proceed with Step 2, below.
If you mark that some cost above $2,500, you will be asked Did you make improvements to rental in 2020?

If you say Yes, you will be taken through the screens for the Improvements election.
If you say No, you will see the screen Do you have any items that aren't covered by your elections? Proceed through the screens to enter these assets.

-for additional information follow this link-

Tangible Property Final Regulations | Internal Revenue Service