New Tax Code Provision is a Win-Win for HVAC Upgrades

If you’re “on the fence” about investing in energy-based improvements for your business, there’s a recent tax law that just might drive you into action.

The Federal Tax Cut and Jobs Act includes a provision for energy-based improvements – such as HVAC and interior lighting systems – to be immediately expensed.  Under section 179D, Small Business Expensing, all components of “heating, ventilation and air-condition” system can be expensed in the first year instead of being depreciated over 39 years.

Just think about it. Divide your investment by 1 (year) instead of 39 years for your tax deduction. This is a win-win in the energy efficiency world!

Section 179D Benefits:

  • Allows deduction of full amount of equipment up to $1M/yr.
  • Available for leased or purchased equipment, including installation labor
  • Combine with utility rebates to offset equipment cost

Here’s how it works:

Let’s say a business owner installs new HVAC units with equipment and installation cost of $35,000.

  • Under old depreciation rules, the owner claims about $897 in depreciation expense annually over 39 years for net equipment cost of $34,812.
  • Under the new law, the owner may deduct the full cost of the HVAC equipment of $35,000 from their business income the year of the purchase and installation.
  • At business tax rate of 21%, this saves business owner $7,350 in taxes, effectively lowering the cost of equipment.

This is a win-win in the energy efficiency world.  Plus, you can even add to your savings with Direct Install from New Jersey’s Clean Energy Program. Talk to your accounting professional to see how you can reap all the benefits of an energy upgrade this year!


*Disclaimer: Business tax deductions are complicated. The information included here is intended for general information only and is not intended to be tax or legal advice. Please consult your tax professional before making business decisions that could affect your tax situation. Each business situation is different and tax regulations change frequently.