If you were thinking about capital spending for your business before coronavirus, what are your plans now? If your pre-pandemic plans involved an HVAC retrofit, you may want to consider moving those plans to the top of your list. The reason is the Coronavirus Aid, Relief, and Economic Security Act – the CARES Act.
The CARES Act was designed to help sustain the economy and businesses through the economic crisis caused by the coronavirus shutdown. And among the many items covered within its 300+ pages was an important provision that makes financing an HVAC retrofit particularly beneficial right now.
In 2017, the Tax Cuts and Jobs Act (TCJA) changed the rules on bonus depreciation – a tax incentive that allows businesses to deduct a large portion of an asset’s upfront costs, rather than write them off over the asset’s useful life. Under the TCJA, several existing property classifications were removed and consolidated under a single classification – “Qualified Improvement Property” (QIP). Within the Act, QIP was rendered ineligible for bonus depreciation.
In March 2020, the CARES Act was signed into law. Under the CARES Act, depreciation for QIP was amended to a 15-year time horizon, now making it eligible for bonus depreciation under IRC 168. These amended rules apply retroactively to property acquired and placed in service after September 27, 2017 and continue ahead through December 31, 2022.