The Tax Cuts and Jobs Act (P.L. 115-409), signed into law on Dec. 22, 2017, made big changes to the expensing tax provision. Beginning Jan. 1, the costs of certain HVAC products can now be immediately deducted as business expenses rather than recovered far more gradually through decades-long depreciation schedules. For the owner of a commercial building, this means that under Section 179, all components of a heating, ventilation, and air-conditioning system can now be deducted in full as a business expense during the first year, instead of being slowly depreciated over 39 years.
The new tax law now allows the building owner to fully expense HVAC system investments (up to $1 million per building). This provision can have a significant impact on first year cash flow and project return on investment (ROI) for the owner. It can also affect an owner’s decision whether to repair, replace or retrofit existing equipment.