Incentives to Invest in a Fire Sprinkler System
Installing a fire sprinkler system is essential for protecting your commercial property and ensuring the safety of everyone inside. But did you know there are also significant tax incentives to invest in a fire sprinkler system? Follow along to learn how you can take advantage of these incentives.
Section 179: Benefits for Small Businesses
In December 2017, Congress passed the Tax Cuts and Jobs Act (TCJA), allowing business owners to write off the full cost of a commercial fire sprinkler system as an expense, up to $1.04 million. This means that many small businesses can immediately recover the costs of their investment. Additionally, while Section 179 of the U.S. Internal Revenue Code has long allowed small businesses to deduct certain costs upfront – rather than writing it off over its useful life – the latest additions to the code extend these benefits to upgrading existing systems or retrofitting new systems in existing structures.
Cost Recovery Section 13201: Bonus Depreciation for All Businesses
In addition to the tax benefits for small businesses, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 corrected a drafting error of the 2017 TCJA, offering incentives for businesses of any size to install fire sprinkler systems. This tax incentive outlines a bonus depreciation benefit, a method of accelerated depreciation that allows businesses to immediately deduct a large portion of the purchase price of their sprinkler system. This currently applies to sprinkler retrofits in commercial high-rises but does not apply to residential high-rises.
Under the Cost Recovery Section 13201, businesses are still able to benefit from bonus depreciation, but the percentage will gradually reduce until 2027. At that point, the depreciation schedule will be set to 15 years. Here is the current bonus depreciation phase-out schedule:
- 2025: Bonus depreciation is 40% of the cost of property placed in service in 2025
- 2026: The deduction decreases to 20%.
- 2027 and beyond: The depreciation schedule is set at 15 years.
For more information from NFSA, click here.
Consult a Professional Tax Advisor
A professional tax advisor can help your business determine precisely how these new incentives will impact your bottom line. They can also assist property owners in retroactively claiming any missed deductions from installing a fire sprinkler system between September 27, 2017, and the present.
Choose USA Fire Protection for Your Next Project
The USAFP team doesn’t want you to miss out on these excellent incentives. If your next project qualifies, visit our website or reach out to our main office team at 847-816-0050. For projects located in Wisconsin, please call 262-782-3311. To learn more about the fire and life safety systems we offer, click here.