Business Equipment: Section 179, Depreciation or a DeMinimus Expense

That desk, laptop, or company vehicle might affect your taxes more than you think. Get clear on how these items should be handled in your bookkeeping.

Many business owners buy equipment without knowing whether it should be depreciated over time, written off with Section 179, or treated as a smaller expense under de minimis rules. Those choices can impact taxes, bookkeeping accuracy, and how clearly you understand your business finances. In this episode, our favorite Bookkeeping Mensch, Paul Rosenblum, breaks down these three key concepts in plain English and explains why business owners should talk with their tax preparer now that things are a bit calmer post tax season. This episode could save you money and reduce confusion.

Links: 

• NOLO: IRS De Minimis Rule for Deducting Business Property: https://www.nolo.com/legal-encyclopedia/new-irs-de-minimis-rule-deducting-business-property.html#:~:text=Basically
• Quickbooks Small business tax deductions cheat sheet: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://digitalasset.intuit.com/render/content/dam/intuit/sbseg/en_us/Blog/Downloadable-assset/Checklist/small-business-tax-deductions-checklist-us-en.pdf
• Indeed, What Is the Definition of De Minimis in Business? https://www.indeed.com/hire/c/info/de-minimis

Transcript

Season 9 Episode 2: Business Equipment: Section 179, Depreciation or Expense?

Nothing has changed since the last episode – it’s still ‘after’ the April 15th tax deadline to file taxes or to file extensions. So, today, we’re going to continue talking about accounting concepts that everyone – bookkeepers and business owners’ should know.  The last episode was about EBITA.  Today’s episode will be talking about 3 concepts – the depreciation of assets, Section 179, and DeMinimus expenses. Add these concepts to the list of things to talk to your tax preparer now since things are calming down for most EA’s, accountants, and CPA’s.   And don’t forget about the Fan mail feature (the link is in the show notes) which is now voicemail!  Leave me a short message to say hi!  I’m Paul Rosenblum. 

First, let’s talk about Assets. There are ‘cash assets’, current assets’, and ‘other assets’ – categories in the assets section on your balance sheet. We won’t be talking about those today.  However, I’ll be talking about Fixed Assets.  These include equipment, furniture, computers (including I-Pads, I-Phones, and tablets), and vehicles, for some examples. Think of fixed assets as things that you purchase for your businesses to use that have a life expectancy of more than one year. According to the IRS, you have choices on how you want to show these assets in your books and on your business taxes. 

I have always believed that decisions like this do not necessarily belong to the tax preparer 100%-- they should be shared decisions between the tax preparer and the business owner, with the bookkeeper either being part of the discussions or at least told of what the decisions are so that they can prepare the books accordingly. 

If your company purchases a piece of office furniture for $1,000.00, for one example, the standard way of entering that purchase in an accounting system is to enter it as a Fixed Asset. When taxes are being prepared, the tax software will tell the tax preparer how many years that item can be depreciated for based on life expectancy for the kind of item it is. Entries will then be made into the accounting system lowering the value of the Fixed Asset and adding to a depreciation expense which will show up on the profit and loss report.  If the depreciation is 3 years, for one example, then the amount of the annual entry would be $333.00 per year until the Fixed Asset is zero and it’s fully depreciated on 3 different years of the profit and loss report.  If the bookkeeper enters each Fixed Asset as another account on the chart of accounts, then it’s easy to run a balance sheet and see all of the fixed assets and what the value of them are.  

However, there are two other ways of dealing with the same situation, rather than using the standard depreciation schedule over a life expectancy of an item.  

The first is using Section 179. This allows businesses to deduct the full purchase price of qualifying equipment, software and vehicles up to 2.5 million dollars in the year that they were purchased and started to be used. It could be new or used equipment which are considered tangible items, but it does not apply to intangible assets such as trademarks and intellectual property. Section 179 includes property purchased for business use, and certain improvements like HVAC units and certain improvements to the building, if the business owns the property. The equipment that you might choose to use Section 179 on has to be used by the business more than 50% of the time.  

For 2026, vehicles have a limit of 6,000 lbs. (you look up the weight on the website or the owners’ manual) if you use Section 179 ….of $12,200 and heavier vehicles have a $31,300.00 limit although bonus depreciation can be applied to certain vehicles. The tax preparers tax software will answer that. The total Section 179 deduction cannot exceed the business taxable income for the year. 

And now my ‘favorite’ one --- (not really) – this is called DeMinimus expenses. The definition of DeMinimus:  

DeMinimus cost refers to expenses or values so small, trivial or infrequent that accounting for them is unreasonable or administratively impractical.  

According to the IRS website, DeMinimus items include: 

• Controlled, occasionally employee use of photocopier 
• Holiday gifts
• Meal money or transportation expenses for working overtime
• Group term life insurance for employee spouses or dependent with value of not more than $2,000
• Flowers, fruit, books, etc. provided under special circumstances (whatever that is – the IRS offers no explanation on that one)
• Personal use of a cell phone provided by an employer primarily for business purposes

According to the IRS, to determine a DeMinimus, one should consider its frequency and its value. There is no set amount of value that I can find that makes an item or items DeMinimus.  This seems to be decided by the particular tax preparer. 

I have had a case recently, where one of my clients opened up a second location for their business for in-patient treatments.  They purchased beds, mattresses, dressers, and closets for each room.  I entered all of them as separate Fixed Assets in the books.  The tax preparer wanted them to be treated as DeMinimus expenses. Many of these items were over $1500 and had a life expectancy of more than one year, so they would be considered Fixed Assets. True, they are, in theory, not frequently purchased, but because it is a treatment center, things can get damaged and might need to be replaced. So, personally, I wouldn’t consider these items DeMinimus, but the CPA did.  My signature is not on the tax return, so I made them all DeMinimus. As you see, there are some fine lines on this one. 

Aside from the IRS and the opinion of the tax preparer, one has to think of these kinds of things from the business owners’ perspective.  How does a business owner want to view these kinds of items in their books for planning purposes?  It’s not all about taxes – some of the categorization has to do with the businesses input. I have always been against these kinds of decisions being made only by the tax preparer with no input from educated business owners. 

According to my research on this subject, to use DeMinimus expenses, the company is required to have a written accounting procedure in place indicating that it will expense any item below the threshold and treat the amount paid as an expense. 

According to the IRS, the threshold for DeMinimus items is $100. If an item’s value is more than $100, they should not be considered DeMinimus. But as per NOLO.com, the maximum dollar amount of DeMinimus expenses is $2,500.00 ---And that’s per item, according to NOLO, in an article written in 2025. So, it’s not 100% clear to me – talk to your tax preparer on that one. And even though this pod hasn’t had interviews, this sounds like a potentially interesting one with someone who really knows who I can pick the brains of. Any accountants listening to me right now?   Leave me voicemail or email! 

In practice, tax preparers use $2,000.00 and lower as a DeMinimus item.  I know, it’s complicated.  And this is why business owners and taxpayers should have a conversation with their tax preparer about these procedures. 

Let’s call this HI.  By the way, this stands for ‘Human Intelligence’, as opposed to ‘artificial’. 

Ahhh…  Those DE lovely, DeMinimus rules. It’s enough to make my head spin! 

And just talking about threshholds -- do you know that gifts for clients are deductible, but only $25.00 per person per year?   Well, now you know. 

Time to get back to work. Even though it’s after tax season, I am still in catch-up mode.  Before I know it, it’ll be June, and half the year will be over!  Time to start preparing for next tax season!  

I’m Paul Rosenblum

Links: 

https://www.nolo.com/legal-encyclopedia/new-irs-de-minimis-rule-deducting-business-property.html#:~:text=Basically%2C%20the%20de%20minimis%20safe,f)%20(2025).)

https://digitalasset.intuit.com/render/content/dam/intuit/sbseg/en_us/Blog/Downloadable-assset/Checklist/small-business-tax-deductions-checklist-us-en.pdf

https://www.indeed.com/hire/c/info/de-minimis