The $2500 expense rule is officially called the de minimis safe harbor election. It allows businesses to immediately deduct items costing $2,500 or less per item, rather than capitalizing and depreciating them over several years.

Without this rule, you would need to depreciate a $2,000 laptop over five years, deducting around $400 each year. With the de minimis election, you deduct the full $2,000 in the year you bought it. The tax benefit comes sooner and you have less depreciation tracking to manage in future years.

The rule applies per item, not per purchase. Buy five $2,000 laptops on one invoice and you can expense all five immediately because each individual item is under the threshold. But a $3,500 printer cannot be split up to get under the limit. It gets depreciated or you use Section 179.

Common items that qualify include computers, phones, tablets, small tools, office furniture, printers, and similar purchases. For contractors and service businesses that regularly buy equipment, this rule simplifies bookkeeping significantly. Instead of tracking dozens of small assets through depreciation schedules, you expense them and move on.

To use this rule properly, you need two things. First, a written accounting policy in place at the start of the tax year stating you will expense items below the $2,500 threshold. This does not need to be complicated. A simple statement in your accounting procedures works. Second, you must make the election on your tax return. Your accountant handles that portion, but you need the written policy documented in your records before the IRS asks for it.

One common mistake is misunderstanding what counts as one item. A computer system with a monitor, keyboard, and tower might be considered one unit or separate items depending on how they function independently and how they are invoiced. When the answer is not obvious, document your reasoning.

The de minimis safe harbor works alongside Section 179 and bonus depreciation. Those provisions handle larger purchases above $2,500. The de minimis rule is simpler for small purchases because you just categorize the expense like any other operating cost without tracking it on a depreciation schedule.

Accurate bookkeeping services ensures these purchases get categorized correctly throughout the year and the written policy stays documented. Working with a Phoenix area enrolled agent means the election gets filed properly on your return and you have someone to answer questions about whether specific purchases qualify.