Small businesses win one battle to simplify their taxes

A couple of years ago the IRS came out with new rules on what small businesses had to do to immediately deduct small purchases of things like equipment and furniture.  The rules left business owners and their tax pros gnashing their teeth at the complexity and recordkeeping hassle they presented.

The rules generally are still in place, but the IRS has finally simplified things a little bit by making it easier for small businesses to write off the costs of items of up to $2,500 in the year they are purchased.

This $2,500 limit, up from $500, applies to tangible property—also known as capital assets used in a business.

The impracticality of the $500 limit was obvious to anyone who would spend more than that for a computer or other machinery with an effective life of only two or three years, but under the rules could be restricted from being able to write off the full cost.

Larger businesses that have an Applicable Financial Statement (AFS) can write off items of up to $5,000.  If you don’t know what an AFS is, that means 1) you don’t have one, and 2) you’re a normal human being.

If you want to read all about this, the IRS’s explanation is here.



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