Can resellers deduct equipment under $2,500 in the year they buy it?
Yes, if you elect the de minimis safe harbor: a business without an applicable financial statement can deduct amounts paid for tangible property up to $2,500 per invoice or per item, as long as it treats them as expenses in its books under a procedure in place at the start of the year. The election is made each year with a statement attached to a timely filed original return, it covers every qualifying purchase that year, and it doesn't apply to inventory or land.
General information from IRS sources, not tax advice. It doesn't say what you should file; check with a tax professional about your own situation.
Checked against the IRS and eCFR pages listed below on .
What the IRS says
"If you don't have an AFS, you may use the safe harbor to deduct amounts up to $2,500 ($500 prior to Jan. 1, 2016) per invoice or item (as substantiated by invoice)."
"The de minimis safe harbor election does not include amounts paid for inventory and land."
"…you must expense amounts on your books and records for the taxable year in accordance with a consistent accounting procedure or policy existing at the beginning of the taxable year."
"Only deduct these amounts as other expenses. Don't include these amounts on any other line."
What qualifies
| Purchase | Cost | Under the safe harbor? | Why |
|---|---|---|---|
| Thermal label printer | $389 | Yes | Under $2,500 per item |
| Laptop | $1,150 | Yes | Under $2,500 per item |
| 10 shelving units on one invoice, with delivery | $2,920 ($292 per unit) | Yes | Each unit, with its share of the delivery fee, is under $2,500 as shown on the invoice |
| Used cargo trailer | $2,900 | No | Over $2,500 for one item; the normal capitalization rules apply |
| A pallet of returns to resell | $1,000 | No | Inventory is excluded |
Making the election
The regulation says to attach a statement titled "Section 1.263(a)-1(f) de minimis safe harbor election" to the timely filed original return, including extensions, for the year the amounts are paid. It lists your name, address and taxpayer identification number and states that you are making the election.
It is made every year you want it, and it applies to all amounts that qualify that year. The IRS says an annual election isn't a change in accounting method, so Form 3115 isn't used to start or stop it.
Your books have to match
Without an applicable financial statement, the IRS says you don't need written procedures, but you must expense the amounts in your books under a consistent procedure or policy that existed at the beginning of the year.
An applicable financial statement means one filed with the SEC, a certified audited statement with a CPA's report used for credit, owners or another substantial non-tax purpose, or one required by a government agency other than the IRS or SEC. With one, the limit is $5,000 and the procedures must be written.
Supplies without the election
The IRS's materials and supplies rules cover property costing $200 or less, items with a useful life of 12 months or less, consumables and components. Incidental supplies such as pens and paper, kept without records of use, are deducted in the year paid; non-incidental ones when first used or consumed. If you make the de minimis election, qualifying materials and supplies fall under it instead.
Worked examples
A year of equipment
A seller buys a $389 label printer, a $1,150 laptop and 10 shelving units at $280 each with a $120 delivery fee on the same invoice. The regulation says delivery on the same invoice is included in cost and allocated, so each unit is $292 and the invoice $2,920. Under the safe harbor, $4,459 is deducted for the year ($389 plus $1,150 plus $2,920). A $2,900 cargo trailer bought the same year doesn't qualify.
All or nothing for the year
Electing the safe harbor means applying it to every qualifying amount that year: the seller above can't expense the printer under it and capitalize the laptop.
Edge cases
- Inventory treated as non-incidental materials and supplies under the small business rules is still inventory, the IRS says, and isn't covered.
- Property expensed under the safe harbor isn't treated as a capital asset or section 1231 property when you later sell it, the regulation says.
- Splitting one item into several invoices to fit under the limit falls under the regulation's anti-abuse rule.
- Amounts over the limit aren't forced into capitalization by the safe harbor; the IRS says they follow the normal rules, such as those for repairs or incidental supplies.
What to do
- Put your expensing policy in place before January 1 and follow it in your books all year.
- Keep invoices that show per-item prices and any delivery charges.
- Ask a tax professional to attach the election statement to each year's return you want it for.
- Treat inventory separately: see do small resellers have to keep inventory.
Questions
Do I need a written policy?
Not if you don't have an applicable financial statement. You do need a consistent procedure in place at the beginning of the year and to expense the items in your books under it.
Is $2,500 a yearly limit?
The IRS describes it as $2,500 per invoice or per item, as substantiated by the invoice, not as a total for the year.
Where does it go on Schedule C?
The Schedule C instructions say to deduct de minimis amounts only as other expenses in Part V, not on any other line.
General information, not tax advice
This page summarizes IRS publications, instructions and guidance as read on . It doesn't say what you should file or deduct. Tax rules depend on your facts, and state rules aren't covered here (see state rules). Check with a tax professional.
Sources
Every figure, rule and quote on this page comes from one of these official pages.
- Tangible property final regulations (FAQ) (IRS, page reviewed or updated Aug 4, 2026; read Oct 19, 2026)
- 26 CFR 1.263(a)-1(f), de minimis safe harbor election (eCFR) (eCFR, up to date as of Oct 15, 2026; read Oct 19, 2026)
- Instructions for Schedule C (Form 1040) (2025) (IRS, page reviewed or updated Apr 30, 2026; read Oct 19, 2026)
- Publication 334 (2025), Tax Guide for Small Business (IRS, page reviewed or updated Apr 30, 2026; read Oct 19, 2026)
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