De Minimis Safe Harbor: For Self-Employed, Non-Employees, and Gig Workers!

Let us rejoice in the topic of Tangible Property Expenses: Originally a Reddit Post

Let me start by saying I am not a licensed professional, a mere civilian trying to hep out other civilians who don't want to pay someone $200 or even $90 to an online website for such tiny expenses. I have a degree in Anthropology and research is my game, plus I've been taught the hard way about 1099-Misc and served in the restaurant for over 10 years. Yikes. Skip to the end for the link to the website. I'm also going to add some photos from the website on how to fill out the Schedule C form. 

I digress.

Yesterday I was researching for hours, an extension from previous research I was doing on this law/rule/regulation, whatever you wanna call it. 

I struggled to find a situation close to mine and lots of articles cater to business owners and not non-employees aka contract workers. And I wish more people would post about their findings, so here I am--hopefully saving someone else some time and money. 

Basically, this law--De Minimis Safe Harbor--allows you to claim individual items less than $2500 (as of 2016, previously was $500) as an expense for one year. These items must be used for business/work purposes only. This allows gig workers or small business owners to claim expense/get returns quicker than using the dreaded depreciation rule every year. You do have to attach a statement to your return claiming that you are using safe harbor, the official statement is listed on the website as well as the IRS website.

My guess is that the lack of and convoluted articles out there now are likely due to this being a relatively new law and the increase in non-employee/gig workers.

My Situation

I found a side gig monitoring zoom conference sessions, I had just moved and am also making a career change, so I wanted at least a little cash. Unfortunately, my laptop was over 10 years old and I needed it to be able to handle minor video editing. So I inevitably had to purchase a pretty expensive laptop. The laptop was $100 more than I made from this company, but the job is only a few days out of the month and I had only just started in November. Regardless, I wanted to write this off. While I can't claim 100% usage, I can claim some of it. This is where you need to be careful, only claim the precentage of usage you actually do for WORK. Honestly, Iav eno idea if there is an actual formula for this, it would be great to know but that just sounds like a hairy mess. I'm sure even the greatest CPA just goes by a random guess. Don't come for me.

I decided to be safe and only claim I've been using my laptop 20% for work, so I would take 20% of the laptop price and write that number down on Part II, Line 27a  (Other Expenses) and on the line under Part V - Other Expenses. I am also a rule follower and like to fly under the radar. I am not rich...yet..and haven't mastered the art of legal tax evasion. 

Again, this is just for "small" expenses (may be large to you, as was to me), 20% of the laptop is basically what I would have paid for a tax preparer/accountant/cpa to tell me just that. Not worth it.

I will likely do a little more research, as the article noted, the topic you are looking for would be "Tangible Property Expenses". It's better to re-check yourself, but as far as I have found, this is collectively how you can claim an expense such as this, legally. I did try reading this information from the IRS website, but it was a difficult to understand some of the language, they also don't really give good examples or provide links to forms for reference while reading. And, it's literally scrolling until you are 100 years old through wordy black text. Confusing on purpose right?

Also, I found out that as of 2020, the IRS passed a law that companies with non-employees have to send a 1099-NEC vs the 1099-Misc, due to the rise in the gig economy. Makes sense looking at the two forms, the misc is way too broad and applies more to entrepreneurs or legitimate contract workers with lots of equipment and write offs.

Comments from Reddit

"You are correct. You could also utilize section 179 or 168k (100% bonus depreciation) to write off asset purchase in year 1. By the way, if you file Schedule C you are considered a business owner. Also, you should consider a career in accounting! Perhaps a as a seasonal tax preparer? You certainly have the aptitude!" -- An acclaimed CPA Reddit User

"The de minimis safe harbor definitely is a better option if it's available. You have to worry about potential depreciation recapture with either the section 179 expense deduction or bonus depreciation, but not with the safe harbor election." --Other Reddit User

Here is the link to the website.

If you have anything to add, leave a comment!

Schedule C Form Pt. II and Pt. V

See line 27a for where to report expense, remember work usage only.

Fill out the same information in Part V and describe expense to the left.


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