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Case Study 3: Types of Business ExpensesBarry makes his living as a handyman and earned $17,438 during the tax year. In the same year, Barry bought a new ladder for $450 and uses it exclusively in his business. In keeping his books and records, Barry uses an accounting procedure whereby he deducts amounts he pays for business equipment if the cost of the equipment is $1,000 or less. Under the de minimis safe harbor, Barry can deduct the full cost of the ladder as a business expense, as well as any other equipment purchases for $1,000 or less, by attaching the required statement to his timely filed tax return. Click here for an explanation. Taxpayers may elect to apply a de minimis safe harbor to amounts paid to acquire or produce tangible property used in the taxpayer's trade or business. They may use this safe harbor to deduct amounts paid for tangible property up to $2,500 per invoice or item (substantiated by invoice) if they have accounting procedures in place whereby they deduct amounts paid for business property if the costs of such property are under a certain de minimis amount. The de minimis safe harbor election does not include amounts paid for inventory and land. The election applies for the taxable year and, if made, applies to each expenditure meeting the criteria for the election in the taxable year. 
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Income — Business Workout
Business Expenses In Scope for VITA/TCE
Form 1040, Schedule C Instructions