Recent Changes to Tax Law Mean Small Business Can Deduct All HVAC Expenses in the First Year of Purchase and Installation
It’s been a long time coming, but the folks at the nonprofit Heating, Air Conditioning, and Refrigeration Distributors International worked hard to show lawmakers that small business could really benefit from revisions to Section 179 of the IRS tax code. And heavens to Betsy, Congress finally did something! As of January 1, 2018, federal tax law now allows for all qualified HVAC equipment and installation costs to be fully written off in the first year after purchase. Before this change, commercial building owners could only deduct a few hundred dollars each year over a 40-year period, making HVAC upgrades a costly, if necessary decision in many cases. Today, with this expansion of Section 179 and the passing of the new HEAT (HVAC Expensing and Technology) Act, these improvements are now feasible for thousands of commercial property owners.
What does this mean in terms of savings? A HARDI spokesperson used the example of a commercial building owner spending $14,000 to purchase and install new a HVAC rooftop unit. In years past, the commercial building owner could only deduct approximately $350 of this expense on a yearly basis in depreciation costs. That isn’t much. However, under this year’s new tax code, the owner can deduct all $14,000 as an expense from their business income. Using the top marginal tax rate applied, this translates into a $5,180 reduction in their taxes. No wonder this is regarded by so many as such good news.
As Air-Conditioning, Heating, and Refrigeration Institute (AHRI) President & CEO Steven Yurek explains, “By allowing our members’ products to be treated as capital equipment, this bill will save energy for the nation and money for building owners who [were] prohibited from expensing this equipment …we have been working with Congress on this issue for many years, and this is a good first step toward encouraging installation of today’s highly energy-efficient HVACR equipment manufactured by our member companies.”
Beyond the obvious financial benefits of the new deductions, the IRS changes signal a new way to incentivize small businesses to select and install integrative HVAC technologies that will not only cost less to operate, but use far less energy than older systems. Whether transitioning to programmable thermostats, demand-controlled ventilation, or automatic sensors to measure and respond to temperature, humidity, or occupancy, these upgrades make a difference, even without replacement of the complete HVAC system. And that’s pretty cool!
Have questions? Need help with understanding how HVAC upgrades could improve your bottom line? Call Air-Tro today to speak with a qualified, experienced professional. (626) 357-3535