Expenses that are deductible on your tax returns have to be ordinary and necessary. An ordinary expense is one that is common or frequently incurred in your line of trade. A necessary expense is helpful and appropriate in developing your business.
There are assets purchased that you have to capitalize, meaning the cost of which, including freight and installation, has to be expensed over the life of the assets. However, under the de minimis safe harbor rule of the IRS for tangible property, you can expense the cost of the asset during the period that is incurred. For example, if you purchase a computer for $2,000, you can deduct the entire amount of $2,000 as an ordinary and necessary business expense. As long as the cost of the asset does not exceed $2,500, you can apply the de minimis safe harbor rule.
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