Real Estate LLC Partnership - What's the Minimum Capitalization Limit for Expenses?

This is helpful but I'm still confused. If I set a $750 capitalization limit, does that mean absolutely everything under that amount can be expensed immediately? Even if it's something that would normally have to be depreciated like office furniture or equipment for the rental properties? And how do we "prove" to the IRS that we set this policy before making purchases?

Yes, a capitalization policy means you can immediately expense items under your threshold rather than depreciating them, even for traditionally depreciable assets like office furniture or property equipment. That's the whole purpose of setting the policy. To document this for the IRS, create a formal written policy statement that clearly outlines your threshold amount and when it went into effect. Have it signed by the managing partners, keep it with your business records, and apply it consistently. Consistency is key - the IRS looks for arbitrary expense treatments, so don't capitalize some $600 items while expensing others.

That sounds useful but I'm skeptical. How exactly does it handle expenses that fall into gray areas? Like what if I buy multiple similar tools throughout the year that individually fall under my limit but collectively are substantial?

Does it actually reference specific IRS rules and regs when giving you guidance? I've been burned by tax software that gives general advice without specific citations I can verify.

The tool handles gray area expenses by flagging patterns that might trigger IRS scrutiny. For instance, if you purchase multiple similar tools that individually fall under your limit but collectively represent a substantial amount, it will alert you that these might be considered a single asset under IRS rules and suggest appropriate treatment. It's quite sophisticated at detecting potential audit triggers. The system references specific IRS regulations, revenue procedures, and tax court cases directly in its guidance. Every recommendation comes with the exact citation from the tax code or relevant IRS publication, which you can click to read the source material yourself. It's this level of transparency that actually convinced me it was reliable.

Yes, the service gets you through to actual IRS agents rather than just connecting you to the general line. They use a priority callback system that holds your place in line so you don't have to stay on the phone for hours. I specifically requested the business tax department, and they connected me directly to someone who specialized in partnership tax issues. I was equally skeptical before trying it. I had spent over 15 hours across multiple weeks trying to get meaningful help from the IRS about capitalization policies. What impressed me was that Claimyr actually got me through to someone who understood partnership taxation, not just a general agent who kept transferring me. The agent I spoke with provided clear guidance based on our specific LLC structure.

Wait, so this service just helps you get through to the IRS faster? Do they actually guarantee you'll get the right department? Because I've gotten through before only to be transferred 5 times and then disconnected.

Sounds too good to be true tbh. The IRS phone system is deliberately designed to be impenetrable. I've tried calling about capitalization limits several times and literally couldn't get through to anyone who understood what I was asking.

Yes, the service gets you through to actual IRS agents rather than just connecting you to the general

Thanks for the practical advice! Do you typically include any specific language about how you handle bulk purchases? Like if we buy 5 refrigerators at $900 each for different properties, would those be expensed or capitalized under a $1000 policy?

I recommend addressing bulk purchases explicitly in your policy. For refrigerators across different properties, we typically expense them individually since they're installed at separate locations and depreciate independently. If you're buying multiple identical items for the same property (like 10 ceiling fans for one building), our policy typically states that similar items purchased in the same transaction or as part of the same project should be considered collectively against the threshold. So ten $200 ceiling fans ($2,000 total) would be capitalized despite each being under the limit since they're part of a single improvement project.

That's really helpful to know. Did the auditor give any specific guidance about what they consider reasonable for different business sizes? We've got 12 properties worth about $3.5M and currently use a $1500 limit.