Your accountant is correct. IRS has not defined the threshold
amount at which you MUST capitalize an asset. From their
perspective, it depends on the size of the business.
Businesses with low incomes and little or no profit,
should capitalize purchases at a lower level than large,
However, if you look at the books of publicly traded
corporations, with millions of dollars in assets, you
will find that even they will still start capitalizing
assets at $500 or $1,000.
I've only been preparing tax returns, and representing
clients at IRS audits for about a quarter century. So, I
know that I still have a lot to learn. But, to date, IRS
auditors have always accepted $500 as an acceptable
capitalization level - even for my smallest businesses.
So, trust your accountant's judgment - it's sound.
You can read IRS Publication 946 - Depreciation
Reading "What Property Can Be Depreciated"
You won't find a specific amount mentioned - just a
description of property types.
To respond about your specific items:
A> $350 Digital camera
This is 'Listed Property".
If you have 50% or more of personal use, you can't
take a deduction at all. You must keep a log of
personal and business use of all listed property.
If you use it 100% for business - either expense
the whole amount as a supply, or use Sec 179 depreciation,
just in case you're afraid IRS would insist that it should
After all, you have $100,000 of IRS Code Section 179 depreciation
available to you since 2003. Take advantage of it any time you
B> $200 Windows XP Software upgrade AND C> $600 Quickbooks Software
A change in the tax laws, starting 2003:
Inclusion of off-the-shelf computer software as
eligible section 179 property. Off-the-shelf
computer software placed in service in 2003
qualifies for the section 179 deduction.
See Off-the-shelf computer software in the
discussion on eligible property under
What Property Qualifies? in chapter 2.
D> $150 for a used pallet jack -- even though this would be $800 new
It doesn't matter how much it would have cost new.
You bought it for $100. Treat it as a supply.
E> 5 $100 memory upgrades for PC's, purchased on the same invoice
Each item was less than $500. They belong in supplies,
or office supplies. Again, if you have doubts - use Sec 179.
I've never had a problem with expensing anything like that.
Incidentally, your accountant didn't make it up. She went
to many hours of continuing education - and that has been
the rule of thumb in the tax and accounting industry for
over 20 years.
Sometimes, there are unwritten rules that are standard practice.
I hope this makes you feel more comfortable.