As a Mechanical Contractor, we're very familiar with the financial pressures that aging mechanical infrastructure can place on a company. Surprise capital expenses have a huge impact on a company's bottom line - and before 2018, those impacts were felt for years after the upfront costs.
The recent passing of the Tax Cuts and Jobs Act signed into law on December 22, 2017 (taking effect for the 2018 tax year) drastically changes the way we approach handling HVAC capital costs as building owners. Today, new HVAC systems fall within the 179 Deduction up to $2.5M, with a $1.5M deduction limit.
Let's talk about a practical example. We're working with a prominent local commercial office building that needs equipment replacement totalling $150,000. Before, the building owner would have had to depreciate the purchase over 39 years, and if you assumed a 35% tax bracket, they would have only been able to claim a $3,846 first-year depreciation and only save about $1,346 in taxes.
Today, the building owner can fully deduct the $150,000 purchase, for a tax reduction of $52,500. This is a huge swing in the favor of the building owner! See the table below for the calculative example.
The upper limit on this deduction is $1.5M, which is a massive improvement compared to the upper limit of $125,000 back in 2007. We think that this new legislation will help building owners and businesses make smart and timely decisions regarding the investment in their mechanical infrastructure.
Want to calculate your own savings, using your own real-life data? Click here to check out a calculator that will help you estimate your tax benefits.
As always, if you require any input, help, or advice regarding your building's mechanical systems, our technicians and account managers are ready to help repair and optimize your equipment.