(Updated July 2019) When you’re a small business owner, everything, including HVAC upgrades, is about your bottom line. A good accountant helps come tax time – but did you know Estes Commercial can help you save, too? Tax code changes give small business owners advantages when it’s time to make HVAC upgrades. Learn what the tax code says and how HVAC upgrades benefit your business in more ways than just comfort.
The Tax Cuts and Jobs Act Changes How Property Owners Deduct HVAC Upgrades
The Tax Cuts and Jobs Act of 2017 changed the way small business owners choose to expense HVAC upgrades for their facility. Under IRS Tax Code Section 179 Small Business Expensing, business owners may deduct the entire cost of expenses related to commercial HVAC upgrades in the first year.
Starting January 1, 2018, up to $1 million of qualifying capital may be deducted immediately. Deductions are limited to $2.5 million. The deduction is available for real property, which includes HVAC installations as well as building automation systems (BAS), ventilation upgrades or controls.
Previously, business owners were required to depreciate the cost of an HVAC upgrade over a period of 39 years. This meant business owners deducted a small portion of the total expense for each year of the depreciation period.
Now, a business owner can elect to not treat an HVAC upgrade as an expense chargeable to a capital account. Claim the entire expense of the HVAC upgrade for the tax year in which it was purchased and placed in service.
Tax Benefits for Atlanta Commercial HVAC Owners
What do these changes to Section 179 mean for your business? Beyond the energy efficiency improvements and enhanced comfort offered by an HVAC upgrade, the purchase lowers your tax bill.
By deducting the entire cost associated with your commercial HVAC upgrade in one year, you significantly lower your tax bill right away, rather than depreciating slowly over a long period.
Let’s say your commercial HVAC upgrade has a total cost of $14,000. Under the old system, you may depreciate approximately $358 per year for a period of 39 years. Under the new system, you may deduct the entire $14,000 at one time. This can lower your business’s tax bill by approximately $5,000!
Instead of making a barely noticeable difference on your tax bill for nearly four decades, your business receives significant savings in one year. These substantial savings mean big things for your business. Free up cash for other business investments and allocate funds where it impacts your company the most.
How to Qualify for the Tax Deduction with HVAC Upgrades
To take the Section 179 deduction for your commercial HVAC upgrade, you must:
- Purchase the HVAC upgrade and use it during the same year.
- Provide your tax professional with all records associated with the purchase, including:
- date of purchase
- the date the HVAC upgrade was placed in service, and
- expenses related to the HVAC upgrade, including installation and freight costs.
- Your tax professional will add up qualifying property items and elect to take the Section 179 deduction by filing IRS Form 4562.
Learn More About Commercial HVAC Upgrades for your Atlanta Facility or Property
Reap the tax benefits of an HVAC upgrade for your business in 2019. Contact Estes Commercial today for a free commercial HVAC upgrade estimate and benefit your business with a replacement for your aging commercial heating and air system.
The Estes Commercial team serves healthcare facilities, hotels, schools, places of worship, warehouses and other commercial properties throughout Atlanta, Georgia.
From our offices in Kennesaw and Atlanta, we travel to Dunwoody, Marietta, Buckhead, Druid Hills, Decatur, Virginia Highland, Peachtree City and Midtown. We also serve Sandy Springs, Roswell, and Johns Creek. Need emergency 24/7 commercial HVAC service? We’re here for you.