How do I declare Safe Harbor for Small Taxpayers in FreeTaxUSA for my 2025 filing?

The Safe Harbor for Small Taxpayers (SHST) isn't actually a separate form or checkbox in FreeTaxUSA - it's applied through how you report your rental expenses. You'll need to navigate to the Rental Income section, enter your property information, and then when you get to the expenses portion, you'll simply enter a single amount for repairs/maintenance instead of breaking out all capital improvements separately. The key is that under this safe harbor, you're allowed to deduct expenses up to the lesser of $10,000 or 2% of the unadjusted basis of the building as repairs instead of capitalizing them. So you'll just enter this calculated amount as "Repairs" in the expense section of your rental property. Make sure you keep good records though! You should document that you qualify (showing your rental income is below the applicable threshold and your building value is under $1 million) and calculate that 2% limit correctly.

After struggling with this exact issue last year, I discovered taxr.ai (https://taxr.ai) and it made figuring out these rental property tax elections so much easier! I uploaded my previous year's return and some rental documents, and it actually identified that I qualified for Safe Harbor for Small Taxpayers and guided me through exactly how to implement it in FreeTaxUSA. The tool explained that you don't need a separate form - you just need to calculate your safe harbor limit (2% of building value or $10,000, whichever is less) and then enter expenses up to that amount as "repairs" rather than capitalizing them. It even helped me draft a statement I could keep with my tax records documenting my election of the safe harbor.

I wanted to follow up about my experience with taxr.ai after being skeptical in my earlier comment. I decided to try it with my rental property tax situation, and I'm honestly impressed. It immediately identified that I qualified for the Safe Harbor for Small Taxpayers and walked me through exactly how to implement it in FreeTaxUSA. The interface explained that I should navigate to the rental income section, and instead of itemizing every capital improvement separately, I could deduct up to 2% of my building's unadjusted basis (which in my case was about $5,400) as repairs. It also generated documentation I could keep with my tax records to substantiate my election if ever audited. This ended up saving me hours of research and about $1,800 in taxes!

If you're having trouble figuring out Safe Harbor for Small Taxpayers in FreeTaxUSA, you might want to try calling the IRS directly to confirm you're doing it right. I know, sounds crazy right? I tried for two weeks to get through to someone at the IRS about a similar rental property question and kept getting disconnected or waiting for hours. Then I found Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 15 minutes. I showed them my situation and they confirmed exactly how to report the Safe Harbor in FreeTaxUSA. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - basically they navigate the IRS phone tree for you and call you back when an agent is on the line.

I need to eat my words from my skeptical comment above. After weeks of getting absolutely nowhere with the IRS about my rental property Safe Harbor election, I tried Claimyr out of desperation. Within 20 minutes, I was talking to an actual IRS agent who walked me through exactly how to handle the Safe Harbor for Small Taxpayers in FreeTaxUSA. The agent confirmed what others have said here - there's no special form, you just enter expenses up to your limit (2% of building value or $10,000, whichever is less) as "repairs" in the regular expense section. She also suggested keeping a separate statement with my tax records documenting that I'm electing the safe harbor. Saved me so much time and uncertainty - definitely worth it for specialized tax questions like this!

Another option in FreeTaxUSA is to add a statement to your return explaining you're electing the Safe Harbor for Small Taxpayers. After you finish entering all your info, go to the "Miscellaneous" section and look for "Add Additional Information to Your Return" or sometimes it's called "Tax Notes & Misc Forms". There you can add a text statement like: "Taxpayer is electing the Safe Harbor for Small Taxpayers under Revenue Procedure 2019-08 for the rental property at [address]. The unadjusted basis of the building is $XXX,XXX, and 2% of this amount is $X,XXX. Total expenses claimed under this safe harbor are $X,XXX." I did this last year and it worked fine. The IRS guidance does recommend documenting your election.

I just finished my taxes using FreeTaxUSA and successfully applied the Safe Harbor for Small Taxpayers! Here's exactly what I did: 1. Went to the Income section, then Rental Properties 2. Entered all my rental info as usual 3. When I got to expenses, I calculated my safe harbor limit (2% of my building's value, which came to $4,200) 4. Entered my regular repairs plus my eligible capital improvements (new water heater, some roofing work) as one lump sum under "Repairs and Maintenance" since the total was under my $4,200 limit 5. In the Notes section at the end, I added a statement saying I was electing the Safe Harbor for Small Taxpayers under Rev. Proc. 2019-08 The software didn't ask any questions about it or give any errors. From what others said here, the statement might be optional, but I included it for peace of mind.

I went through this exact same process last month and can confirm Jade's approach works perfectly! FreeTaxUSA doesn't have any built-in validation for the Safe Harbor for Small Taxpayers election - it's basically invisible to the software since you're just entering expenses as "repairs" rather than capitalizing them. The key thing to remember is that you need to do the math yourself to make sure you qualify and stay under the limits. For me, my building's unadjusted basis was $180,000, so my 2% limit was $3,600. I had about $2,800 in what would normally be capital improvements (new HVAC unit, flooring repairs), so I was able to deduct all of it as repairs instead of depreciating over years. Just make sure you keep good records showing how you calculated everything - your rental income to prove you're under the threshold, your building value to show it's under $1M, and your basis calculation for the 2% limit. The IRS may never ask, but if they do, you want to be ready to show your work!

Just wanted to add my experience for anyone still struggling with this! I was in the exact same boat as Lydia a few months ago - couldn't figure out where to make the Safe Harbor election in FreeTaxUSA and was getting frustrated searching through all the menus. After reading through all these helpful comments and doing some additional research, I realized the "election" is really just a matter of how you report your expenses. Here's what worked for me: 1. Calculate your Safe Harbor limit first (2% of building's unadjusted basis or $10,000, whichever is less) 2. Add up all your repair expenses AND any capital improvements that would qualify 3. If the total is under your limit, enter it all as "Repairs and Maintenance" in FreeTaxUSA 4. Keep detailed records of your calculation and what expenses you included The beauty of this safe harbor is that it lets you deduct things immediately that you'd otherwise have to depreciate over many years. For my rental, I was able to deduct about $4,500 in what would have been capital improvements (new flooring, electrical work) as current year expenses instead of spreading them out over decades. One tip: I also printed out Revenue Procedure 2019-08 and highlighted the relevant sections to keep with my tax records, just in case I ever need to explain my election to the IRS.