De Minimis Safe Harbor

Small Taxpayer Safe Harbor

Making the Election

A qualifying taxpayer elects the small taxpayer safe harbor annually by including a statement in its timely filed, original tax return for the year of the election. The statement must be titled "Section 1.263(a)-3(h) Safe Harbor Election for Small Taxpayers" and include the taxpayer's name, address, taxpayer identification number, description of each eligible building property to which the taxpayer is applying the election, the amounts paid for repairs, maintenance, improvements and similar activities performed on the eligible building(s) described above qualify under the safe harbor provided in Reg. section 1.263(a)-3(h)(1).

In the case of an S corporation or a partnership, the entity makes the election (not the shareholders or partners). Once made, the election is generally irrevocable and may not be changed through the filing of an application for change in accounting method.

To enter the election in the TaxAct program (for 1040 and 1041 returns):

Schedule C (Form 1040) Profit or Loss From Business

1. From within your TaxAct return (Online or Desktop), click Federal (on smaller devices, click  in the top left corner of your screen, then click Federal).
2. Click the Business Income dropdown, then click Business income or loss from a sole proprietorship.
3. Click + AddSchedule C to create a new copy of the form or click Edit to edit a form already created (desktop program: click Review instead of Edit). 
4. Proceed through the interview process until you get to the screen titled Do any of these uncommon situations apply to your ___ work?, select either: 
   • I want to make the de minimis safe harbor election 
   • I want to make the small taxpayer safe harbor election.
5. Then continue through the interview process to have the applicable statement e-filed and printed with the return.

Schedule E (Form 1040) Supplemental Income and Loss

1. From within your TaxAct return (Online or Desktop), click Federal (on smaller devices, click  in the top left corner of your screen, then click Federal).
2. Click the Rent or Royalty Income dropdown, then click Real estate rental income.
3. Click + AddSchedule E, Pg 1 to create a new copy of the form or click Edit to edit a form already created (desktop program: click Review instead of Edit).
4. Proceed through the interview process until you get to the screen titled Rental Income - Repair Regulation Elections. 
5. Check the specific election to have the statement e-filed and printed with the return.

Schedule F (Form 1040) Profit or Loss From Farming

1. From within your TaxAct return (Online or Desktop), click Federal (on smaller devices, click  in the top left corner of your screen, then click Federal).
2. Click the Business Income dropdown, then click Farming income or loss.
3. Click + AddSchedule F to create a new copy of the form or click Edit to edit a form already created (desktop program: click Review instead of Edit).
4. Proceed through the interview process until you get to the screen titled Farm Income - Expenses. Click Yes.
5. On the screen titled Farm Income - Repair Regulation Elections, check the specific election to have the statement e-filed and printed with the return.

Form 4835 Farm Rental Income and Expenses (Form 1040 TaxAct program only)

1. From within your TaxAct return (Online or Desktop), click Federal (on smaller devices, click  in the top left corner of your screen, then click Federal).
2. Click the Rent or Royalty Income dropdown, then click Farm rental for crop shares.
3. Click + AddForm 4835 to create a new copy of the form or click Edit to edit a form already created (desktop program: click Review instead of Edit).
4. Proceed through the interview process until you get to the screen titled Farm Rental - Income Summary, click Expenses. 
5. On the Farm Rental - Expenses screen, click Yes.
6. On the screen titled Farm Rental - Repair Regulation Elections, check the specific election to have this statement e-filed and printed with the return.

Related Links

• Internal Revenue Bulletin 2013-43
• Revenue Procedure 2015-20

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the webpage or document at the time it is accessed.