Changes to Tax Break Make Now the Time for Businesses to Upgrade Their HVAC Equipment: Section 179

Updated on June 8, 2018
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Dan has been in the HVAC industry for 22 years with experience ranging from installation and service to sales and distribution.

Big Changes to the Way Businesses Expense HVAC Equipment Mean Big Savings

Tax code Section 179 is the reason businesses have been waiting for to upgrade and replace their outdated, dilapidated, and inefficient HVAC equipment.

For years companies have resisted replacing and/or updating their HVAC equipment due to the typically large cost that comes along with it. Instead they keep dumping money into servicing and replacing parts on these units in the hopes they can drag it along for another year or 2 before finally being forced into replacing it. I call this throwing good money after bad but who can blame them? It's not like buying a new machine that will increase production or investing in a marketing campaign that will boost sales over last year. Purchasing new heating, air conditioning, and ventilation equipment has just been a hit to the bottom line...until now.

2018 is the year that justifies companies spending the money to invest in new HVAC/R equipment.

Are you the owner of a business who has put off your HVAC needs?

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What is Section 179?

Section 179 is a part of the IRS tax code that allows companies to write off the entire cost of equipment or software needed to run their company in that given year whether bought outright or financed rather than having to depreciate it over time. This section now includes essential heating, cooling, ventilation, and refrigeration equipment that was not eligible before.

Commercial Warehouse

Imagine how much it costs to replace the HVAC equipment in this commercial building and knowing it comes right off the bottom line.
Imagine how much it costs to replace the HVAC equipment in this commercial building and knowing it comes right off the bottom line.

What Does the Change to Section 179 Mean?

To better understand why this is such an important change for businesses as well as those who serve their HVAC needs you have to understand what the rules were before.

In the past if a company spent, let's say $10,000 on a new HVAC or ventilation unit, they would only be able to write off a portion of (depreciate) that expense over the next 39 years. Even though the unit was needed to keep the building warm, cool, or ventilated, it wasn't considered a business expense like a tool or machine essential to operating their business. On top of that, most HVAC equipment was not likely to last 39 years so as you can see, there was no incentive to purchase new equipment until it was absolutely necessary.

Fast forward to the present, as of January 1, 2018 and good through December 31st, 2018 that same company's HVAC purchase can be written off entirely, including installation up to $2.5 million for a max benefit of $1 million for the year of 2018.

As with many of our tax codes, this could change. There has been no guarantee that 2019 will hold the same benefits for companies thus why I believe 2018 is the year to make room in the budget for new HVAC equipment.

Commercial Rooftop Unit

This unit might have only allowed a few hundred dollar a year write off for the next 39 years but now, a business can write off thousands in one year and save on energy costs.
This unit might have only allowed a few hundred dollar a year write off for the next 39 years but now, a business can write off thousands in one year and save on energy costs.

Other Benefits Companies Will Gain By Upgrading Their Equipment

The first thing that comes to my mind is the money that's not going to have to be spent on repairs to keep an old HVAC unit running. A new warranty will cover most commercial equipment for at least a year on parts and 5 years on main components like compressors and heat exchangers. If companies are really savvy, they will have an extended warranty or service agreement built into the pricing of their installation costs.

Another benefit is energy cost savings. Electric and gas bills for larger companies are astounding so imagine if they can rid themselves of that old 60-70% efficient unit and have a new 80-90% efficient unit that meets the more modern energy efficiency ratings as well...they could see literally hundreds if not thousands of dollars in energy savings per month!

Where To Go For IRS Forms and Further Details on Section 179

To see if your business and it's expenses qualify for the benefits I've laid out here for you as well as the necessary IRS forms needed to claim your tax break you'll need to visit the Section 179 website.

I would love to consult with each and everyone of you on whether or not you and your business qualify but I am not a representative of the IRS nor a tax consultant so I recommend that if you have any questions of this nature you work directly with one of these two sources.

Why Section 179 Is Important to HVAC Contractors and Companies

First off, aren't these businesses too? Just because you're an HVAC company doesn't mean you want to spend money on your HVAC equipment anymore than the next guy.

Second, and most importantly, if you're on a commercial sales call and you do not know about this change in the tax code, your savvy competitor who does is certainly going to get the job. While you spoke about saving him on repairs and energy, the next guy told him the same thing and then explained how he will recoup a huge amount of his money at the end of the year making the job well within his budget.

Did you know...

about the changes to Section 179 before reading this article?

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Keep Your HVAC Salesmen in the Know

There are a lot of HVAC publications in the market and while I see many of them laying on tables and in bathrooms, I know they aren't being read when I speak to contractors and their employees. The surprised look on their face when I tell them about occurrences like this and questions that follow tells me they didn't read the latest edition laying on the table in their waiting rooms.

Keeping your technicians, installers, and salespeople in the know will help your business capture as many sales as possible. Stay up to date with tax laws, energy efficiency requirement changes, new tariffs, and more. All these things affect our industry and the more you know, the more likely you are to not only make the sale but gain a long term customer who trusts you'll always have him on top of things.

~ We're all in this together ~

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    © 2018 Dan Robbins

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