In 2015  an incredibly advantageous tax law pertaining to capital asset deductions was introduced…  and yet it slipped by virtually unnoticed.

In late November, The IRS passed a new law to raise the capitalization requirement (so called “de minimis” rule) for assets used in business, from a level of $500 to $2500.

To some people, this has no major effect on their taxes. But to most others, this is of great benefit.

What this means is that the purchase of business assets do not have to be separately stated, and separately depreciated, for amounts under 2500, allowing for the full write off in 2016. So for example, a computer purchased for 2000, would normally have required being depreciated for a five year period, under the MACRS (modified accelerated cost recovery system), and would have required taking only a fraction of the computer for each year. The new provision allows for a full write off in the year acquired.

But this gets better yet, especially in the area of rental property. Small improvements not falling under the category of repairs, tools, appliances, furniture- normally requiring a long term write off- can now be expensed directly (assuming there is no limitation for passive losses- which will be discussed in a future blog). This will allow the immediate increase of losses for those who spend a lot repairing and improving property. There is an even higher benefit to those who acquire a lot of property, who otherwise would face maximum capitalization rules- this new ruling opens up the ability to maximize the amount taken under IRS code sec 179, which is the direct write off of property allowed.

Please note that there are additional limitations that apply. Feel free to address any questions to us, we will be happy to work with you.