The IRS recently issued Notice 2015-82 which raised the capitalization of business assets threshold from $500 to $2,500. This notice is effective on 1/1/16 but the IRS has stated that it will not be questioning 2015 tax returns on this issue.

This means that any individual cost business asset that is less than $2,500 does not have to be included as a fixed asset on your balance sheet and then depreciated over the assets’ applicable life. Instead, these assets can be deducted currently as office supplies, computer supplies, etc.

For example, if you purchase two computers for $4,600 total, the individual cost of each computer is $2,300 (below the $2,500 threshold), and therefore, the computers do not need to be capitalized and depreciated over 5 years. Instead they can be expensed currently.

There are some details which need to be addressed so that this is handled properly in the eyes of the IRS. The business will need to adopt a fixed assets policy in writing (including some specific language) and keep with the permanent file.

If you have any questions about this implementing this new IRS notice at your business, please feel free to call or email me.