The $2,500 expense rule, known as the De Minimis Safe Harbor Election, allows businesses (especially smaller ones without an Applicable Financial Statement - AFS) to immediately deduct the full cost of tangible property items up to $2,500 per item or invoice, rather than depreciating them over several years, simplifying taxes and potentially increasing current year deductions. For businesses with an AFS (like audited financials), the limit is $5,000, but the election must be made annually by attaching a statement to the tax return, and it requires a consistent accounting process for small items.
The IRS created a safe harbor rule under Treasury Regulation §1.263(a)-1(f) that allows immediate expensing of qualifying assets. For most small businesses without an Applicable Financial Statement (AFS), the limit is $2,500 per invoice or per item. For larger businesses with an AFS, the threshold doubles to $5,000.
If you are under 65 and single, you need to file a tax return if your gross income is at least $15,750 for the 2025 tax year. If you are 65 or older, this threshold increases to $17,750. Gross income includes all income you receive in the form of money, goods, property, and services that is not exempt from tax.
The IRS does not require receipts for travel-related expenses under $75, unless it's for lodging. This includes taxis, tolls, parking, and business meals.
The IRS allows taxpayers to deduct up to $3,000 of realized investment losses ($1,500 if married filing separately) against ordinary income each year. This deduction applies only to losses in taxable investment accounts and must be realized by December 31st to count for that tax year.
Tax loss harvesting is a fundamental idea that reduces the tax burden resulting from short-term and long-term investment profits. However, the strategy should only be used for tax planning and not be employed as a portfolio management tactic since its frequent use may amplify losses.
The biggest tax mistakes people make include filing late, math errors, incorrect personal info (like Social Security numbers), forgetting deductions/credits (like EITC), misreporting income, not signing forms, and making errors with bank details for direct deposit, all leading to delays, penalties, or missed savings, with using tax software or professionals helping avoid these common pitfalls.
It's important to keep in mind that if your laundry claim is over $150 total, or your total claim for work-related expenses is greater than $300, then you'll need to provide written evidence, like diary entries or receipts.
Most taxpayers will do anything they can to avoid tax audits. Filling out an accurate tax return is the best way to avoid an audit. Additionally, you should ensure you double-check your math and only claim legitimate tax deductions. E-filing may also be helpful.
Many business expenses are 100% deductible, including advertising, employee wages, rent, supplies, and certain business meals like company parties or meals for the public, while personal deductions like student loan interest or charitable donations (depending on the type) can also be fully deductible for individuals. The key is that the expense must be "ordinary and necessary" for your trade or business or meet specific IRS criteria, often differentiating from the 50% rule for client meals.
As mentioned above, discretionary expenses are any costs that a consumer or business wants rather than needs. Some common discretionary items include: Vacations and travel expenses.
$300 maximum claims rule
This rule states that if the total of your work-related expenses is $300 or less (not including car, travel, and overtime meal expenses, which can be claimed separately), you can claim the total amount as a tax deduction without receipts.
Wages, dividends, bank interest, and other income received and that was reported on an information return should be entered carefully. This includes any information needed to calculated credits and deductions.
Loan schemes. Perhaps the most popular example of tax avoidance is operated by companies where directors receive their income as directors' loans and then either do not repay such loans to the company or write them off at the year-end.
Top IRS audit triggers
What are the most common tax deductions people claim?
Al Capone. A federal grand jury indicted notorious gangster Al Capone, leader of the Chicago Outfit crime syndicate, with 22 counts of tax evasion totaling over $200,000 in 1931 (equivalent to more $3.8 million today).
The wealthy are often able to write off such things as lavish meals, as well as the use of their yachts and private planes, helping them essentially pay for these assets the average person can't even dream of owning.