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Change in capitalization threshold

We are currently using $500 threshold to capitalize assets, and discussing increasing it to $2,500 per IR-2015-133. I would like to know how I should treat the existing assets, historical cost of which is less than $2,500 but hasn't been fully depreciated by the end of this calendar year.


Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

My understanding of the updated information is it's only effective for tax years being January 1, 2016. Therefore, anything considered capitalizable bought in 2015 and prior would still need to be capitalized even if it's $2,499.99.

Historically priced items below that limit will need to be left on the books as capitalized assets. However, I'm open to my interpretation being incorrect.

Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Rules and pronouncements aside (I will get in trouble for this), this is how I will approach it.

1. Of course, capitalize new purchases @2,500
2. The flipside to your issue is expensing ALL of the previously capitalized (under 2,500 and net of depreciation) items which if material (amount) wont be tenable. If immaterial and the month can absorb it then by all means expense it..
3. I would just continue with the amortization schedule of the previous items (my preference as it does NOT involve any work) or you can make a choice of accelerating the depreciation amount (maybe as a whole) that is tenable to you and your monthly numbers.

Kumiko Turley
Title: n.a
Company: n.a
(n.a, n.a) |

Very helpful. Thank you very much!

Michele King CPA
Title: Controller
Company: SaltWorks, Inc.
(Controller, SaltWorks, Inc.) |

Keep in mind the Tangible Property regulations state that you must capitalize anything in excess of $500 (regardless of a higher capitalization limit) for repairs that extend the life of assets.


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