The global pandemic has left us reeling in so many ways. But I’m a silver-lining kind of person and I believe that not everything related to the pandemic has been negative. For example , Congress passed the 2020 Coronavirus Air, Relief, and Economic Security (CARES) Act. CARES has the potential to impact businesses in a huge way when it comes to facility upgrades. Let’s break it down.

Background

In 2017, Congress passed tax reforms to allow businesses 100% bonus depreciation on qualified improvement property (QIP). QIP includes things near and dear to our collective HVAC hearts like heating and cooling equipment, building controls, and more, for existing facilities (not new construction!). However, when the reforms were passed, the QIP costs under IRS tax code Section 168 had to be deducted over a 39 year period. In 2020, Congress took the opportunity with the CARES act to allow an amendment to Section 168 so that the bonus depreciation could be deducted in the first year placed in service!

Q: Who’s Eligible?

Non-residential building owners who are investing in HVAC mechanical system upgrades and replacements.

Q: What’s the Max Cost of the Equipment?

The CARES Act places no limitation on the cost of equipment purchased.

Q: Can the tax advantages be combined with utility rebates?

Yes, it can! That can maximize your savings!

Q: What are the eligible equipment purchase dates for the 100% bonus depreciation?

Here’s the good news: taxpayers can claim 100% bonus depreciation for QIP acquired and placed in service after September 27, 2017 and before January 1, 2023.

Why should my business take advantage of these tax changes?

Other than the tax benefits, there are some additional benefits to using the CARES Act revisions to upgrade your building equipment.

• Replacement of aging systems can have a significant impact on the energy efficiency of a building.
• Retrofit upgrades or replacements can be costly.
• Many building owners are looking to improve indoor air quality to help improve the health and safety of their buildings. Utilizing this tax advantage can make these upgrades less impactful to the bottom line.

Our team is ready to help you assess your facility and help you decide what upgrades or replacement equipment could benefit your facility and your building occupants. Contact your local rep to find out more!

Disclaimer: Neither Hoffman & Hoffman nor Kelly Patterson are Tax Advisors. Customers should always consult their tax experts and advisors in application of tax laws relating to their business operations. Each customer must assess the actual impact on their business.