Basically, the de minimis safe harbor allows businesses to deduct in one year the cost of certain long-term property items. IRS regulations set a maximum dollar amount—$2,500, in most cases—that may be expensed as "de minimis," which is Latin for "minor" or "inconsequential." (IRS Reg. §1.263(a)-1(f) (2025).)
The Internal Revenue Service (IRS) is increasing the safe harbor affordability threshold to 9.02% for the 2025 tax year. As a result, employers will have more flexibility in making their employee premiums meet the affordable safe harbor for next year as required under the Affordable Care Act (ACA).
As of August 29, 2025, the U.S. has suspended the de minimis exemption for all countries and no longer accepts Entry Type 86. Many other countries offer de minimis exemptions, but most use a threshold lower than $800.
The IRS "safe harbor" rule for avoiding underpayment penalties uses 100% of the prior year's tax liability for most people, but switches to 110% for higher-income earners (Adjusted Gross Income over $150,000, or $75,000 if married filing separately). This means you're generally protected if you pay in the lesser of 90% of your current year's tax or the 100% (or 110%) prior year's amount, ensuring you don't face penalties even if you owe more when you file.
The de minimis safe harbor is simply an administrative convenience that generally allows you to elect to deduct small-dollar expenditures for the acquisition or production of property that otherwise must be capitalized under the general rules.
For 2025, how much may Harbor deduct under the de minimis safe harbor of §1.263(a)-1(f), and how does Harbor make the election? Answer: Harbor may deduct $22,700 under the de minimis safe harbor by attaching the required annual election statement to its timely filed original 2025 return.
To avoid the IRS estimated tax penalty, pay at least 90% of your current year's tax or 100% of your prior year's tax (110% if your income was high), whichever is smaller, through withholding and estimated payments, or owe less than $1,000; use Form 2210 for waivers in cases like disasters or disability, or consider annualizing income if your earnings vary.
The W-2 safe harbor
It can be the trickiest safe harbor to use because it cannot be determined until the end of the year. To claim the W-2 Safe Harbor, the following formula is generally used: W-2 Box 1 Wages multiplied by 9.02% with an adjustment for partial year coverage.
The IRS underpayment penalty is triggered when you don't pay enough tax throughout the year, typically by failing to meet safe harbor rules: either paying less than 90% of your current year's tax liability or less than 100% (or 110% for high earners) of your prior year's tax, and owing $1,000 or more in tax after credits and withholding, or by paying estimated taxes late. Common causes include insufficient tax withholding from paychecks, underestimating income from self-employment, or not making timely quarterly estimated tax payments.
A common asset allocation rule of thumb is the rule of 110. It is a simple way to figure out what percentage of your portfolio should be kept in stocks. To determine this number, you simply take 110 minus your age. So, if you are 40, then the rule states that 70% of your portfolio should be kept in stocks.
In the Autumn Budget 2025, the UK government announced its intent to remove the £135 customs duty de minimis relief for low-value imports, marking a significant change for cross border ecommerce sellers, carriers, and logistics providers shipping into the UK.
If the individual tax cuts expire, taxpayers in all income groups would face higher and more complicated taxes. Machinery and equipment expensing is a key provision that, if allowed to expire, would especially harm capital-intensive industries like manufacturing.
It's a big deal," Trump said in April. "It's a big scam going on against our country, against really small businesses, and we've ended it. We put an end to it." Trump says suspending de minimis will help the U.S. lower its trade deficit, and make it harder to import illegal drugs like fentanyl.
To avoid the 22% tax bracket (or any higher bracket), focus on reducing your taxable income through strategies like maxing out 401(k)s and HSAs, deferring bonuses, tax-loss harvesting, smart charitable giving, and strategic asset location, understanding that higher rates only apply to income within that bracket, not your entire income.
Safe Harbor contribution limits
In 2025, the basic employee deferral limits for a Safe Harbor 401(k) plan are the same as any employer-sponsored 401(k): $23,500 per year for participants under age 50.
De minimis thresholds exist to reduce the administrative burden of processing low-value shipments and help consumers and businesses import small orders more easily. However, if your shipments exceed these limits, customs authorities can impose duties, taxes, and inspection procedures.
Use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts to see if you owe a penalty for underpaying your estimated tax.
5 Common Mistakes That Lead to Employee Underpayments
The IRS "safe harbor" rule for avoiding underpayment penalties uses 100% of the prior year's tax liability for most people, but switches to 110% for higher-income earners (Adjusted Gross Income over $150,000, or $75,000 if married filing separately). This means you're generally protected if you pay in the lesser of 90% of your current year's tax or the 100% (or 110%) prior year's amount, ensuring you don't face penalties even if you owe more when you file.
Avoid a penalty
You may avoid the Underpayment of Estimated Tax by Individuals Penalty if: Your filed tax return shows you owe less than $1,000 or. You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less.
The IRS released Revenue Procedure 2024-35 on September 6, 2024, which set the 2025 affordability safe harbor percentage for employer-provided medical coverage to 9.02%. This is an annually indexed amount and reflects an increase from 2024's 8.39% safe harbor percentage.
Penalty. 0.5% of the unpaid tax for each month or part of the month it's unpaid not to exceed 40 months (monthly).
Example Safe Harbors under the Anti-Kickback Statute
Beating the 60% tax trap: top up your pension
One of the simplest ways to avoid the 60% income tax trap is to pay more into your pension. This is a win-win, because you reduce your tax bill and boost your retirement fund at the same time. Here's an example. You get a £1,000 bonus, which takes your income to £101,000.