New Proposed Regs

The IRS has issued new proposed regs on capitalization vs. expensing of materials and supplies. I usually think about pens or pencils, paper, etc. as supplies and never considered a computer to meet the definition of materials and supplies, but computers are used as an example to explain one section of the proposed regs.  The de minimis rule exception for capitalization can now apply to computer equipment. 

If you file a timely election on your tax return for 2012 and thereafter, and if you have a written policy in place for expensing such computer items under a certain dollar amount, for example- $500 per unit, then you may deduct the total purchase of computers for the year that meet your policy guideline of $500 or less per unit times the number of units purchased.  This is subject to the upper limit of .1% times the gross sales of the business, or 2% of the total amount of depreciation and amortization claimed.    

For additional information, give Kelly Phillips, Pancho Espejo, or myself a call.


Richard Bell, CPA