Buy a box of pens and it's obviously an expense. Buy a $40,000 machine and it's obviously an asset you depreciate. The interesting territory is everything between — the $900 laptop, the $350 office chair, the $2,000 camera — and it's governed by one of the most genuinely helpful rules in small-business tax: the de minimis safe harbor.

The classic distinction

Supplies are things you consume: paper, ink, packaging, cleaning products, small tools with short lives. You deduct them when you buy them (technically, when used — but for incidental supplies, when bought is fine).

Equipment is property with a useful life beyond a year: computers, furniture, machinery, vehicles, cameras. The default tax treatment is capitalization — put it on the balance sheet and deduct it gradually as depreciation over its assigned life (5 years for computers, 7 for office furniture, and so on).

Depreciation schedules for a $600 monitor are nobody's idea of a good time, which is why the exceptions matter more than the rule.

The de minimis safe harbor: expense small purchases immediately

The de minimis safe harbor lets you deduct any item costing up to $2,500 (per item or invoice line) in the year of purchase, no depreciation, no asset tracking — as long as:

  • You have a consistent policy, in place at the start of the year, of expensing items under your chosen threshold (up to the $2,500 cap for businesses without audited financial statements)
  • You actually follow it in your books — the tax treatment matches your bookkeeping
  • You attach a small annual election statement to your tax return

Write the policy down once ("Items under $2,500 are expensed when purchased"), date it, and keep it with your records. From then on, the laptop, the chair, the monitor, and the printer are all simply supplies-type expenses. Note the per-item limit is checked against the invoice: a $4,800 invoice for two $2,400 workstations qualifies; one $4,800 workstation does not.

Above the threshold: Section 179 and bonus depreciation

Purchases above your de minimis threshold become fixed assets — but that rarely means slow depreciation in practice:

  1. Section 179 lets you elect to deduct the full cost of most equipment in the year it's placed in service, up to a generous annual limit (well over a million dollars — far beyond typical small-business purchasing). It can't create a business loss, though.
  2. Bonus depreciation similarly allows immediate write-off of qualifying property and, following 2025 legislation, is back at 100% on a permanent basis. It can create a loss.

The practical upshot: almost any equipment purchase can be fully deducted in year one through some route. The difference is bookkeeping. De minimis items never touch the balance sheet; Section 179 and bonus items are still assets you record, track, and report — which matters if you sell them later or stop using them for business.

Why you should still book equipment as an asset

It's tempting to expense everything and let the tax return sort it out. Resist it for larger items, for two reasons. First, your books should tell you what the business owns — a services firm with $15,000 of computers and cameras shouldn't show them as vanished expenses. Second, when you sell or trade in equipment, you need its cost basis and depreciation history to compute the gain. A simple fixed-asset account plus a one-line register (item, date, cost, method) is enough.

Quick sorting guide

  • Consumables (paper, ink, packaging, small tools): supplies, always.
  • Durable items at or under $2,500 with a de minimis policy: expense to supplies, note what it was.
  • Durable items over $2,500: fixed asset; deduct via Section 179 or bonus depreciation at tax time, with your professional's help.
  • Repairs that keep equipment working: expense. Improvements that make it better or extend its life: usually capital.

The de minimis election is the small-business gift here — one paragraph of policy converts most of your equipment questions into ordinary expenses.