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Fixed Asset Capitalization: Safe-Harbor Threshold Under The New Repair Regulations

The IRS has recently released 2013 regulations that address the capitalization of fixed assets. Under these regulations, the IRS categorizes companies in two ways: those with or without Applicable Financial Statements (AFS).

Applicable Financial Statements are certified audited statements, SEC filings, or other financial statements (other than a tax return) required to be provided to the federal or state government and/or agency.

If a company has AFS, then under the new de minims safe-harbor rules, it may deduct all items purchased during the year that cost $5,000 or less. If a company does not have AFS, then it may deduct all items purchased during the year that cost $500 or less.

In order to take advantage of the new safe-harbor expensing amounts, a company must have a written fixed asset policy in place prior to January 1, 2014.  For a sample fixed asset policy, click here.  If you haven't done so already, we recommend you create a policy before January 1, 2014.

It is worth noting that a company may choose an amount other than $5,000/$500 when implementing their fixed asset policy, however, an amount greater than the safe harbor threshold may not be upheld if the tax return is audited.

For more information, contact your Berntson Porter tax professional at (425) 454-7990. We're here to help!



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