Written Capitalization Policies Must Be In Place by January 1, 2014

The IRS issued the final repair regulations on September 13, 2013, that clarified a lot of capitalization rules for taxpayers.  As the year-end is quickly approaching, there is one important rule to consider and have in place by January 1, 2014.  In the new repair regulations, the IRS set a de minimis safe harbor rule, in which taxpayers may deduct amounts less than a threshold amount.  The safe harbor thresholds are $5,000 for taxpayers with audited financials and $500 for all others.  In order to apply these safe harbor amount(s), taxpayers must have a written book capitalization policy in place that states for both book and tax amounts below the threshold will be expensed in the financial statements.  Again, taxpayers should have these written policies in place by January 1, 2014 for the safe harbor to be in effect for tax years 2014 and beyond.  Below are links to a quick summary of the repair regulations and a sample de minimis safe harbor written capitalization policy from the AICPA.  If you have questions, please contact our office at 919-571-7055.

 http://www.aicpa.org/InterestAreas/Tax/Resources/TaxMethodsPeriods/ToolsandAids/DownloadableDocuments/Quick%20Summary%20Chart%20of%20Final%20Tangible%20Property%20Regulations.pdf

 http://www.aicpa.org/interestareas/tax/resources/taxmethodsperiods/pages/tangibleproperty.aspx

 

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