Tax Code Change Good News for Atlanta Business Owners!
When you’re a small business owner, everything is about your bottom line. A good accountant on your side can help you save 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 are advantageous to your business in more ways than just comfort.
HVAC Upgrades & the Tax Cuts and Jobs Act
The recently passed Tax Cuts and Jobs Act of 2017 have changed the way small business owners are able to expense HVAC upgrades for their facility. Under IRS Tax Code Section 179 Small Business Expensing, business owners can choose to 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 an HVAC upgrade as well as fire alarms, security systems and roofs.
Previously, business owners were required to depreciate the cost of an HVAC upgrade over a period of 39 years. This meant a small portion of the total expense was deducted 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 – the entire expense of the HVAC upgrade may be claimed for the tax year in which it was purchased and placed in service.
Tax Benefits for HVAC Upgrades
What do these changes to Section 179 mean for your business? Beyond the energy efficiency improvements and enhanced comfort offered by an HVAC upgrade, your business can lower the year’s tax bill with that purchase.
By deducting the entire cost associated with your commercial HVAC upgrade in one year, your tax bill is significantly lowered 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 can mean big things for your business, allowing you to free up cash for other business investments, allocating your funds where it will make the biggest difference for your company moving forward.
How to Qualify with HVAC Upgrades
To take the Section 179 deduction for your commercial HVAC upgrade, you must:
- Purchase the HVAC upgrade and begin using it during the 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 HVAC Upgrades Today
Reap the tax benefits of an HVAC upgrade for your business in 2018. Contact Estes Commercial today for a free HVAC upgrade estimate and learn how replacing your aging commercial HVAC system benefits your business.