Small tools (under $2,500)
The de minimis safe harbor rule lets you expense items under $2,500 each immediately. No depreciation schedules, no Form 4562. Just deduct it.
- Hand tools and power tools
- Small electronics and test equipment
- Kitchen equipment under $2,500
- Cleaning equipment and supplies
Larger equipment (over $2,500)
For equipment over $2,500, you have options:
- Section 179: Deduct the full cost in the year of purchase (up to $2.5M under the OBBBA)
- Bonus depreciation: 100% first-year deduction (permanently restored by the OBBBA)
- Regular depreciation: Spread over 5-7 years depending on asset type
Most small businesses use Section 179 to get the full deduction immediately.
Example
You're a contractor. This year you bought:
- DeWalt table saw: $650 (de minimis)
- Cordless drill set: $400 (de minimis)
- Work truck toolbox: $1,200 (de minimis)
- Trailer: $8,000 (Section 179)
Total deduction: $10,250 all in year one.
IRS Reference
De minimis safe harbor: IRS Regulation 1.263(a)-1(f). Section 179: IRS Publication 946. Report on Schedule C, Form 4562 for Section 179 elections.
De minimis safe harbor: IRS Regulation 1.263(a)-1(f). Section 179: IRS Publication 946. Report on Schedule C, Form 4562 for Section 179 elections.
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