De Minimis Tax Rule: Definition, Calculation, and Example

The de minimis tax rule is an IRS regulation that allows businesses to exclude small amounts of income from their taxable income. This can be helpful for businesses that have a lot of small transactions, as it can reduce their overall tax burden.

The de minimis tax rule applies to both cash and non-cash transactions. For cash transactions, the de minimis rule allows businesses to exclude amounts of $25 or less. For non-cash transactions, the de minimis rule allows businesses to exclude amounts of $500 or less.

There are a few exceptions to the de minimis tax rule. For example, the rule does not apply to transactions that are part of a series of related transactions, or to transactions that are made in order to avoid taxes.

The de minimis tax rule can be a helpful tool for businesses to reduce their tax burden. However, it is important to be aware of the exceptions to the rule, so that businesses do not accidentally include income that should be excluded.

Here is an example of how the de minimis tax rule can be applied. A business has a cash transaction of $100. The business can exclude the $100 from its taxable income, because it is less than the $25 de minimis threshold.

Here is another example of how the de minimis tax rule can be applied. A business has a non-cash transaction of $1,000. The business can exclude the $1,000 from its taxable income, because it is less than the $500 de minimis threshold.

The de minimis tax rule can be a helpful tool for businesses to reduce their tax burden. However, it is important to be aware of the exceptions to the rule, so that businesses do not accidentally include income that should be excluded.