International Fire Protection receives updates from different associations within the Life Safety Industry to stay appraised in the marketplace and up to date on all codes and regulations as they happen.
The Fire Suppression Systems Association (FSSA) recently reminded us about the Tax Code 179 Update.
Starting in 2018, Fire Protection Systems in Commercial Structures
Now Eligible for Full Tax Deduction under Section 179
Section 179 of the IRS Tax Code allows a business to deduct, for the current tax year, the full purchase price of financed or leased equipment and off-the-shelf software that qualifies for the deduction. The equipment purchased, financed or leased must be within the specified dollar limits of Section 179, and the equipment must be placed into service in the same tax year that the deduction is being taken (for example, the equipment must be put into service between January 1st and December 31st of the year the deduction is to be taken.)
The Tax Cuts and Jobs Act
On December 22, 2017, President Trump signed into law H.R.1, aka, The Tax Cuts and Jobs Act. This act is responsible for many sweeping changes to taxes for both businesses and individuals, and also positively affected Section 179. The deduction limit for Section 179 increased to $1,000,000 for 2018 and beyond, and the cap on equipment purchases was increased to $2.5 million. In addition, some additional qualifying property was added, notably improvements to existing nonresidential property, such as roofs; heating, air-conditioning, and ventilation systems; fire protection, alarm, and security systems. The bonus depreciation was also expanded to 100%, and includes used equipment for the first time.
Section 179 and Bonus Depreciation
The most important difference is both new and used equipment qualify for Section 179 deduction, while Bonus Depreciation covers new equipment only and also applies to residential property. Bonus Depreciation is useful to very large businesses spending more than whatever Section 179’s spending limit is for that year. Also, businesses with a net loss in a given tax year qualify to carry-forward the Bonus Depreciation to a future year. When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation – unless the business has no taxable profit in the given tax year.
For more information on the recent changes to Section 179 see the IRS website, www.section179.org, and consult your tax advisors.