For businesses faced with the prospect of having to replace or upgrade their current HVAC System in 2018, we have some fantastic news. Revised for the better in 2018, Section 179 offers an extremely valuable business depreciation deduction for business owners who have been putting off installing a new HVAC system. Section 179 is an important small business tax credit that has been around for a while and has historically allowed for business owners to write off business expenses on mainly business-use vehicles and non-fixture items inside the office building such as computers, printers, copiers, etc. With the new tax laws signed into law in this year, however, business property owners can apply this tax advantage to HVAC equipment up to $2.5 million dollars with a $1 million-dollar deduction limit.
The Rules
Consequently, your business can now write off up to $1 million dollars on the purchase of HVAC equipment. To qualify for this small business tax incentive, the heating and air system is required to be financed or purchased and put into service during the calendar year of 2018. It’s important to note that if you spend more than $2.5 million on equipment in 2018 the deduction amount will decrease. This caveat exists to prevent medium-to-large companies reaping these benefits.
How to Take Advantage of HVAC Tax Credits
To write off your expenditures on an HVAC system for your small business, you must elect to take the deduction. Consequently, to take the Section 179 deduction you’ll need to have your accountant add the IRS form 4562 to your tax return for 2018. Along with this, you’ll need to keep records of expenditures on business equipment you bought or leased during the year. If you’ve already installed an HVAC system within the past 10 years, you should ask your tax accountant about filing an amendment for the year you purchased the equipment to take advantage of the tax break.
2018 New HVAC Upgrade
As an example of Section 179 at work, let’s say your commercial or retail business location needs an HVAC system worth $250,000 in April 2018. You have the equipment installed and running in May of 2018. You can write off the entire $250,000 on your 2018 tax filings, and assuming your business is in the 35% tax bracket, your business will receive a cash savings of $87,500. Meaning you would pay just $162,500 after taxes.
Eligible HVAC Systems
This new tax break now includes central heating and air units for your business building and is sure to help keep your office space climate controlled and comfortable. Nearly all equipment is included in the new tax breaks, making it the best time ever to invest in your building’s HVAC system while considerably reducing that initial investment.
We strongly encourage business owners with aging HVAC systems to investigate maximizing their deductions this year, as there’s no guarantee these changes will remain after 2018. With such an enormous write-off available to businesses, 2018 is the perfect year to invest in your company’s new HVAC system. Contact City Heat and Air at 865-938-1005 or click HERE for more information about replacing your business’s central heat and air system.