One of the biggest challenges small business owners face is coming up with the cash when it comes time to replace outdated commercial HVAC equipment. Fortunately, due to recent legislation – the Tax Cuts and Jobs Act of 2017 – which took effect on January 1, 2018. Commercial business owners now have the financial capacity to upgrade their inefficient or outdated HVAC system for a modern one that provides increased comfort, reliability and lower energy bills.
Thi recent development in federal tax law includes a provision that allows HVAC products to be immediately expensed. What this means for commercial property owners is that under section 179, all components of “heating, ventilation, and air conditioning” systems can now be deducted, in full as a “business expense” during the first year after its purchase, instead of being slowly broken up, or “depreciated” over the next 39 years.
This tax deduction incentive for upgrading your commercial HVAC system is fantastic news for businesses large and small.
New tax law effective January 1, 2018:
26 U.S. Code § 179 – A taxpayer may elect to treat the cost of any section 179 property as an expense which is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which the section 179 property is placed in service. Qualified Real Property includes Heating, ventilation, and air-conditioning property.
Here is an example: A commercial property owner has a new, rooftop HVAC unit installed. The cost for equipment, labor and installation was $14,000. Under the old “depreciation” rules, this property owner can only claim around $350 per year, over a 39 year period for this expense. According to the new tax laws, the business owner can deduct the full $14,000 expense for the replacement project from their business income during the same year of installation. At the highest marginal tax rate that could be applied to this type of purchase, this law change can save the average small business owner over $5,000 in taxes annually.
The Commercial team at Clarke & Rush can help you take advantage of this new tax savings for your business property with a new Commercial HVAC system. For over 54 years, the experts at Clarke & Rush have installed and serviced commercial HVAC equipment throughout the greater Sacramento area. As an experienced contractor, Clarke & Rush has abilities that range from design, to major equipment installation, to routine service calls and preventive equipment maintenance.