As a real estate investor the benefits of the new IRS regulations are exciting, well, as exciting as tax regs can be. Last blog, we delved into routine maintenance and prior to that the small business safe harbor. Today I’m going to discuss materials and supplies.
Materials and supplies are defined as tangible property used and consumed in the taxpayers operations. There are five types, described below:
1.Components that are acquired to maintain, repair, or improve a unit of tangible property
2.Items with a useful life of 12 months or less such as stationary and cleaning supplies (as a side note, i had to share this picture because i found it disturbing that anyone would put a toilet brush in there mouth)
3. Property that cost $200 or less (this was doubled from the old regs)
i.e. cell phone, printer, paper shredder, etc.
4. Fuel, lubricants, water and similar items expected to be used within 12 months
5. A category that lumps all other items that qualify can be found in the regs at (IRS reg.1.162-3)
Materials and supplies may be deducted as long as they are used to maintain or repair (not improve) the existing property. In order to take this deduction you simply must keep your receipts and track your expenses through out the year and deduct the cost of the items as a business expense at tax time.