HVAC Equipment Depreciation:
Repair or Replace?
Although proper preventative maintenance of your building’s HVAC system will result in efficient performance and help extend its service life, there will inevitably come a time when you need to consider the economic and accounting benefits of replacing aging, depreciating equipment with a new heating
and air-conditioning system.
The CARES Act and HVAC
The CARES Act contains several tax savings benefits for businesses, including specific terms for HVAC – with the goal of enhancing Indoor Air Quality (IAC).
For example, under Section 168 of the tax code, the cost of all equipment and components of the “heating, ventilating, and air conditioning system” may be fully deducted for tax purposes in the first year. The CARES Act reduces the depreciation schedule to 15 years and creates a bonus depreciation that allows the taxpayer to take a full deduction of certain costs in a single year. The 100% bonus depreciation applies to qualified property acquired and placed in service before January 1, 2023*.
"The CARES Act reduces the depreciation schedule to 15 years and creates a bonus depreciation that allows the taxpayer to take a full deduction of certain costs in a single year."
Assessing Your HVAC System
Your team at Campbell Mechanical can help provide an assessment of your existing HVAC system and make recommendations for upgrades, replacements, and installations based on the latest equipment and technology available. And your tax advisor should be consulted to help you take advantage of qualifying CARES Act tax benefits.
Because the 2020 CARES Act includes provisions that provide tax benefits through accelerated depreciation for commercial property improvements, now may be the ideal time to upgrade or replace your facility’s older HVAC system.
IRS – More information on depreciation can be found on the IRS website
ASHRAE – Current data and information can be found on the ASHRAE Service Life and Maintenance Cost Database
Our preventative maintenance program combined with these tax strategies creates an opportunity to invest in your business with the savings generated.
Contact Us Here for a System Analysis to help you find that freedom that comes with increased cash flow!
*Consult with your CPA firm to make sure the application is best for your specific business case.