Key takeaways
- CapEx buys or improves something that lasts longer than a year. Day-to-day costs are operating expenses (OpEx).
- Without audited financial statements, the de minimis safe harbor lets you expense items up to $2,500 per invoice or item, per the IRS tangible property rules.
- Larger purchases are depreciated, but Section 179 or 100% bonus depreciation can often deduct them in year one. See Publication 946.
- Keep CapEx receipts for as long as you own the asset, plus the normal retention period after you sell it.
What is CapEx?
A capital expenditure is a purchase you’ll get value from for years, not weeks. A photographer’s new camera body, a contractor’s trailer, a café’s espresso machine and a new roof on a rental property are all CapEx. The money leaves your account today, but the benefit is spread over the asset’s useful life.
That’s why accounting treats CapEx differently. Instead of hitting your profit all at once, the cost goes on the balance sheet as an asset and is expensed gradually through depreciation.
Save receipts for big asset purchases in one place with the Manage Receipt app.
CapEx vs OpEx
| CapEx | OpEx | |
|---|---|---|
| What it buys | Assets lasting more than a year | Things used up within the year |
| Examples | Equipment, vehicles, improvements | Rent, software subscriptions, supplies |
| Recorded as | Asset on the balance sheet | Expense on the P&L |
| Deducted | Over time, or in year one with Section 179 or bonus | In the year paid or incurred |
Use this quick decision path for any big receipt:
- Will it last over a year?No: it’s an operating expense. Yes: keep going.
- Is it $2,500 or less per item or invoice?If you use the de minimis safe harbor, expense it now.
- Is it a repair or an improvement?Routine repairs are expensed. Upgrades that make it better, bigger or last longer are capitalized.
- Capitalize itRecord the asset, then depreciate it or elect Section 179 or bonus depreciation.
Examples
- Usually CapEx: a $4,000 camera, a work truck, a dental chair, a new HVAC system, a commercial oven.
- Usually OpEx: printer ink, monthly software, fixing a broken window, a $300 office chair (under the de minimis rule).
- Depends: a $1,800 laptop is CapEx in theory, but most small businesses can expense it under the de minimis safe harbor.
De minimis safe harbor
The IRS lets businesses without an audited “applicable financial statement” deduct tangible property costing up to $2,500 per invoice or per item (as shown on the invoice) instead of capitalizing it. Businesses with an applicable financial statement get up to $5,000. You make the election each year by attaching a statement to your timely filed return, and you should treat these items as expenses in your own books too.
The limit is per item or invoice, not per year. Three $2,000 laptops on one invoice can each qualify if the invoice shows them as separate items.
Tax treatment
CapEx above the de minimis limit is normally depreciated under MACRS over a set recovery period, such as five years for computers and seven for office furniture. Two shortcuts let you deduct much more in year one:
- Section 179: for 2026, you can expense up to $2,560,000 of qualifying property, reduced dollar for dollar once purchases exceed $4,090,000. The deduction can’t exceed your business income.
- Bonus depreciation: qualified property acquired after January 19, 2025 is eligible for a permanent 100% first-year deduction under the 2025 tax law.
Whichever route you choose, the receipt or invoice proves the cost and the date, which is what every depreciation calculation starts from. Keep it for as long as you own the asset, plus the normal record retention period after you sell it.
Big purchases, kept for the long haul
Scan the invoice for an equipment or vehicle purchase into Manage Receipt and store a copy in Doc Wallet, where it stays safe for as many years as you own the asset. The AI tax report groups these large purchases so your tax preparer can decide between depreciation, Section 179 and bonus depreciation.
Explore AI Tax ReportsFrequently asked questions
Is a laptop CapEx or OpEx?
Technically a laptop is CapEx because it lasts more than a year. In practice, if it costs $2,500 or less and you use the de minimis safe harbor, you can deduct it as an expense right away. A pricier laptop is capitalized but often still deductible in year one through Section 179 or bonus depreciation.
What is the de minimis rule?
The de minimis safe harbor lets a business expense tangible property costing up to $2,500 per invoice or item instead of capitalizing it, or $5,000 with an applicable financial statement. You elect it yearly with a statement attached to your tax return and treat the items as expenses in your books.
Do repairs count as capital expenditures?
Routine repairs and maintenance that keep property in normal working order are usually deductible expenses. Work that improves the asset, adapts it to a new use or extends its life is generally a capital expenditure. Replacing a cracked window is a repair; replacing the whole roof is usually an improvement.
How long should I keep CapEx receipts?
Keep them for as long as you own the asset, plus at least three years after you file the return for the year you sell or dispose of it. You need the original cost to figure depreciation every year and to calculate any gain or loss when the asset is sold.