UNPRECEDENTED TAX BREAKS FOR UPGRADES

BY DAVID FORMAN

I have been in NYC through the entire pandemic, and staying focused on business is difficult but necessary. Business and real estate owners are no exception.

Buildings need upgrades, HVAC systems are old or failing, and local laws pertaining to the environment are nearing compliance dates, such as the Local Law 97’s Climate Mobilization Act–Carbon Emissions Reduction 2024 penalty date.

For a limited time, your business can take advantage of an unprecedented tax relief options available in the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act. Among those benefits are advanced tax deductions for the cost of equipment and system components made to the interior of a building for qualified improvement property (QIP) investments under IRS tax code Section 168.

These upgrades can now be fully deducted for tax purposes, including HVAC, building controls, lighting, boilers, and other systems and components in the first year it is placed in service versus over a 39-year period.

For commercial buildings, the cost of HVAC equipment and Building Automation Systems installed or upgraded in 2020 may be fully deducted as a business expense, and can include costs incurred as far back as January 1, 2018, with no limits on the cost of equipment.

Qualifying expenses include purchased systems as well as components and labor costs, and qualifying buildings include non-residential or commercial buildings (excluding new construction). Your building Upgrades and replacements, when combined with NYSERDA and utility rebates or incentives, will have reduced equipment costs.

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