Syenergy Engineering is committed to helping you navigate through this unprecedented global pandemic by providing you with uninterrupted service and professional guidance for your individual building needs. By examining the tax law changes and how these changes will affect our clients we are well positioned to support our clients and partners as we move forward.
Tax Benefits Available in 2020 Through the CARES Act
Passed by Congress in March 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act offers relief to businesses that have been impacted by the COVID-19 pandemic. One such benefit provides a technical correction to Qualified Improvement Property (QIP), a provision that makes financing a heating, ventilating, and air conditioning system retrofit particularly beneficial at this time.
Under Section 168 of the tax code, the cost of all equipment and components of the HVAC can be fully deducted for tax purposes in the first year it is placed in service versus over a 39 year period. For commercial buildings, the cost of HVAC equipment placed into service in 2020 may be fully deducted as a business expense. The CARES Act now classifies these improvements as 15-year property (vs the 39-year life), which makes it eligible for 100% bonus depreciation retroactive to January 1, 2018.
If you finance an HVAC retrofit this year using a capital lease structure, the new system can be paid for over time, while possibly writing off the entire cost of the system this tax year.
Example of how the tax benefits may be applied:
- A business owner installs new heating and air-conditioning equipment with a material and installation cost of $50,000.
- Under the previous depreciation rules, the business owner would claim approximately $1,282 in depreciation deductions annually over 39 years
- Under the new law, the owner now may deduct the full equipment and installation cost of $50,000 from their business income the year of purchase and installation.
- At the business tax rate of 21%, this saves the business owner $10,500 in taxes, effectively lowering the cost of the equipment.
*Please consult with your tax, accounting or legal advisor for more information. This information does not constitute tax, accounting or legal advice.
Contact your Sales Executive today (josh.allard@syenergy.us) to discuss how you can take advantage of the CARES Act in your building.