Are we able to expense items under de minimis safe harbor that would otherwise be cap

[Stan J.]

I renovated a unit and it looks like it doesn't make sense to depreciate the costs over 27.5 years since the amount is somewhat small. Am I able to immediately expense costs like new flooring, shower tiles/flooring that would otherwise be capitalized? Yes, I'm aware of the $2,500 non AFS limit and each invoice is under that. I'm not aware of a cap though if there is one.

Breakdown:

- 7 invoices total and they're all unique for each part of reno (separate invoice for flooring, shower tile, demo, etc).

- I'm using the total amount for each invoice and the highest one is $2,500. The rest are a couple hundred bucks per invoice or ~$1k (labor)

[Michael Plaks]

Quote from @Stan J.:

I renovated a unit and it looks like it doesn't make sense to depreciate the costs over 27.5 years since the amount is somewhat small. Am I able to immediately expense costs like new flooring, shower tiles/flooring that would otherwise be capitalized? Yes, I'm aware of the $2,500 non AFS limit and each invoice is under that. I'm not aware of a cap though if there is one.

Breakdown:

- 7 invoices total and they're all unique for each part of reno (separate invoice for flooring, shower tile, demo, etc).

- I'm using the total amount for each invoice and the highest one is $2,500. The rest are a couple hundred bucks per invoice or ~$1k (labor)

This is a tricky question subject to interpretation. The Regulations contain an "anti-abuse rule" which basically prohibits breaking into multiple invoices "a single unit of tangible property."

This opens a huge barrel of worms because the definition of unit of tangible property is extremely convoluted and therefore can have different interpretations depending on specifics of each case and on the CPA whom you ask.

It seems that you merely had different stages of the same renovation project. Chances are that it should be considered a single unit and capitalized. But this opinion is made on incomplete facts of your case.

There are two important alternatives to de minimis that you have not explored, or at least have not mentioned.
A. Does your flooring qualify as personal property eligible for 100% bonus depreciation (yes for carpet, no for glued-down tiles) [Not a reference to my colleague's last name ;)]
B. Does your work qualify as fully deductible repairs rather than capital improvements?

And yes, these questions also have different answers, depending on each case specifics and on each CPA's interpretation.