De Minimis Safe Harbor Election: How Landlords Can Maximize Rental Deductions for the 2025 Tax Year

Landlords have a plethora of tax savings deductions at their disposal, but many fear the complexity of using them. Some believe that purchasing a new refrigerator or window means slowly depreciating that asset over several years, but that’s not always the case.

With the De Minims Safe Harbor Election, landlords can immediately deduct smaller purchases, provided they’re below a certain threshold. That means no dragged-out depreciation for many of your property expenses and more tax savings now.

In this article, we’ll explain what the De Minims Safe Harbor election is, what the limits are for your 2025 taxes, and how you and your CPA can simplify these deductions for faster and easier tax savings.

What is the De Minimis Safe Harbor Election? More Savings, No Depreciation. 

The De Minimis Safe Harbor Election is an IRS rule that enables you to deduct 100% of qualifying tangible property costs, such as materials, supplies, and repairs, in the year you buy them. This election applies to new purchases, repairs, and improvements to tangible property for landlords. If you’re wondering what the term “safe harbor” refers to, it’s protection from penalties when you follow the guidelines.

This election applies only to lower-cost purchases, not to major projects that exceed the cost threshold. For those, you still need to file for depreciation or bonus depreciation if they qualify.

2025 De Minimis Safe Harbor Election Thresholds

• $2,500 per invoice (or item): Most DIY or smaller landlords will have a per-invoice fee/item limit for this election.
• $5,000 per invoice (for businesses with an AFS): A higher threshold applies to businesses with applicable financial statements (AFS). An AFS is a financial statement required to be filed with the SEC, along with other certified audited financial statements.

In most cases, landlords won’t have an AFS and will only qualify for the $2,500 threshold. However, many rental expenses fall under this limit. When all these smaller expenses are added up across a portfolio of rental properties (or even just a few), they can lead to significant tax savings.

How the Deminimis Safe Harbor Election Works (the Fine Print)

There are specific considerations you need to follow to ensure you fall under the “safe harbor” part of this election. Here are four things you need to know about how the De Minimis election works:

1. Invoice vs. Item

The $2,500 limit applies per line item on an invoice, not to the entire invoice, provided the items are distinct. This is good news for landlords who may make multiple purchases at Lowe’s or Home Depot in a single transaction.

For example, say you buy a new washing machine, dryer, and refrigerator for a rental unit at Lowe’s, totaling $4,000, which exceeds the limit. When you split those items on the invoice (or receipt) into separate items, each is less than the $2,500 limit. Because each item is below the limit, you can deduct the full $4,000 this year, rather than depreciating over 27.5 years, under the De Minimis election.

For landlords, this rule is both favorable and sensible, as it’s normal to make multiple purchases at once for convenience.

2. Anti-Bundling Rule

If you have a larger project that exceeds $2,500, you can’t break that into smaller components of less than $2,500 each. For example, if you are replacing flooring in one of your units and the material cost of the new floor is $2,000, and the labor is $1,500, the $3,500 total cost cannot be split up into separate costs.

However, this purchase, and many like these that exceed the $2,500 limit, may qualify for 100% bonus depreciation, so be sure to check out our article on that topic and consult your CPA if you have a project above the De Minimis limit.

3. Installation/Labor Costs

The cost of installation or repair labor must be included in the total project cost. For example, if you purchase an expensive new refrigerator for $2,450 and are charged an additional $150 for delivery and installation on the same invoice, that purchase exceeds the $2,500 limit and isn’t eligible for the deduction.

However, if you are charged for installation and delivery on a separate invoice, the regulations generally allow you to separate the item costs, potentially keeping the total under the $2,500 threshold. If this happens, consult your CPA to ensure it isn’t deemed a violation of the anti-bundling rule described above.

4. Applies to All Qualifying Amounts

If you take the safe harbor election for one expense, then you must also use it for all other qualifying expenses. There is no picking and choosing whether or not to use this election; it’s one way or the other. Generally, it makes sense to use it for all of your expenses.

How to File the De Minimis Safe Harbor Election

Filing for the De Minimis Safe Harbor election is surprisingly simple. There’s no specific form you need to fill out. Instead, you attach a written statement to your tax return.

If you and/or your CPA use tax software, it will prompt you with a question like, “Do you want to make the De Minimis Safe Harbor Election?” or “Do you want to apply the 1.263(a)-1(f) election?” If you select Yes, the required statement will automatically attach to your e-filed return as a PDF.

If you’re filing a paper return, you just need to attach a simple written statement to your return. It should say “Section 1.263(a)-1(f) De Minimis Safe Harbor Election” in the title, and include your name, address, taxpayer identification number, and a brief statement confirming you are taking the election.

This election should be filed before the deadline or extension deadline; otherwise, you might not be eligible to use it on an amended return. If the property you’re filing for is part of an S-corp or partnership, you should file the election on the entity’s return and not on your personal tax return.

An Easier Way to Track and Account for De Minimis Expenses

TurboTenant goes far beyond rent collection. It’s also rental property accounting software that helps landlords manage their entire business.

Using TurboTenant’s accounting tools, it’s easy to separate expenses that can be applied to the De Minimis Safe Harbor election from those that must be capitalized and depreciated over time.

For expenses under $2,500 (Safe Harbor applies): Under the ‘Transactions’ tab, mark this as an expense, then categorize it under ‘repairs and maintenance’ or ‘supplies.’ These expenses will go directly to your ‘Net Operating Income’ report and be fully deducted from that year’s profits, no Fixed Asset Schedule needed.

For expenses over $2,500 (Depreciation applies): Instead of marking this cost as an expense, you create a ‘Fixed Asset’ and use the Fixed Asset Purchase transaction to categorize the transaction. The Fixed Asset includes details like the asset’s placed-in-service date and useful life. TurboTenant automatically tracks the depreciation schedule and enables you to batch-enter depreciation entries.

The table below shows a clear view of Safe Harbor expenses vs. Fixed Assets.

When tax time comes, reports you generate from TurboTenant will separate your De Minimis Safe Harbor expenses from your Fixed Assets (Capital Expenditures). Your accountant automatically knows what to expense this year, what to depreciate, and for how long–ensuring faster, more accurate tax returns.

Check out our support article for more details on how to enter Expenses vs. Fixed Assets.

Ready to Lower Your Tax Bill and Simplify Your Rental Accounting?

Don’t rely on tools that aren’t designed for landlord accounting or questionable spreadsheets to manage your expenses and deductions. TurboTenant’s accounting software makes it easy to distinguish between everyday expenses and long-term capital expenditures.

Sign up for TurboTenant and get your Fixed Assets vs. Safe Harbor expenses sorted out before tax season.