In the 2017 Tax Cuts and Jobs Act, expansion of Section 179 (26 U.S. Code § 179) grants commercial businesses the ability to immediately deduct up to $2.5 million in qualifying, nonresidential HVACR equipment purchases (at a 35% tax rate) with a $1 million cap, effective January 1, 2018. Previously, HVAC improvements made to non-residential properties were depreciated over a 39-year period with a maximum deduction of $500,000.
This incentive provides the financial motivation necessary for commercial business owners to replace old HVAC systems with newer, more efficient equipment. HVAC contractors and distributors can take advantage of these tax savings by submitting more competitive bids than those who aren’t capitalizing on this new legislation. The Section 179 incentive is set to expire in 2022.
Overview of the Expansion:
|$500K maximum deduction||$1M maximum deduction|
|39-year depreciation||Immediate expensing|
|No tangible sales incentive||Great sales incentive|
|HVAC Improvement Project (Equipment and Labor)||Tax Rate*||Immediate Deduction|
|$200,000 larger commercial||35%||$70,000|
|$20,000 light commercial||35%||$7,000|
This is a great opportunity for HVAC contractors to educate commercial customers with service agreements on the financial benefits of the new tax laws.
Be sure to review our informational flyer here!
*Business owners should consult their professional tax advisor to determine what qualifies for a tax credit based on their individual situation.