De Minimis Safe Harbor

The De Minimis Safe Harbor (DMSH) (IRS Reg. § 1.263(a)- 1(f)) is one of three safe harbors enacted due to the IRS repair regulation issued in 2013.

See the Routine Maintenance Safe Harbor and the Safe Harbor for Small Taxpayers.

Landlords may use the DMSH to deduct any cost as substantiated by the invoice as long as that cost does not exceed $2,500 ($5,000 if you have applicable financial statements). This dollar limit is applied to each item on the invoice, not the invoice in the aggregate. As a result, it is critically important to itemize all invoices.

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The limit was originally $500 when released in 2013 but the IRS later retroactively applies an increased $2,500 limit.

There is an anti-abuse rule which prevents landlords from breaking down the cost of a component into each of its individual parts on an invoice. For example, you cannot deduct the cost of a new HVAC if the total cost was $4,000 by breaking up that cost into the HVAC’s individual parts on the invoice.

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