So what should you know about the commercial HVAC tax incentives on offer?
This year, the IRS has extended the deadline for filing taxes. It is now roughly a month later, on May 17. Much like last year, the world is still in the iron grip of the Coronavirus pandemic. That’s part of the reason the extension has been giving. With many companies trying to recover from the economic turmoil and uncertainty caused by the virus, saving money on taxes can be an enormous boost to businesses and their bottom lines. So what should you know about the commercial HVAC tax incentives on offer?
A Look at Section 179
We need to discuss what Section 179 is. U.S. Tax Code Section179 a tax incentive where companies benefit when they invest in and then install HVAC system upgrades. Any property that falls within the purview of the code becomes a deductible expense. Thus, the deductible applies to the tax year when the last round of HVAC services occurred. So, if you had the maintenance completed in 2020, then you can write it off.
The 2020 CARES Act and Its Influence on Deductions
Last year, the government enacted the 2020 CARES Act in response to the COVID-19 crisis. This legislation continues to have lasting effects, mainly because the pandemic has yet to end or, at the very least, come under control. New HVAC installations are also covered by Section 179; tax deductions apply to overall project costs over a 39-year window. In other words, you can only write off 2.5% of the cost over that time.
Even so, the CARES Act has begun to pay dividends. Commercial businesses can save even more money on HVAC-related expenses, which could otherwise prove to be a drain on their limited resources. The previous Tax Cuts and Jobs Act needed revision to address a glaring error related to depreciation regulations. Therefore, more tax refunds are available to make use of this year, and presumably, for the next few years.
Which Commercial Properties Qualify for Incentives?
As attractive as these incentives are, not all businesses can qualify for them. Unfortunately, the criteria in terms of eligibility are relatively narrow. Two relevant claim thresholds are capped at $2.59 million for project spending and equipment purchases. Meanwhile, the Section 179 provisions also include a cap – organizations cannot claim more than $1.04 million.
So who is eligible for these incentives?
- Office buildings
- Hospitals and healthcare facilities
- Logistical facilities
- Factories or other manufacturing plants
- Other facilities that are zoned for non-residential use
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