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 a significant tax reform law (P.L. 115-97) that included a special provision for small business owners. Under Section 179 of the U.S. Internal Revenue Code, small businesses can now deduct the full cost of installing commercial fire sprinkler systems, up to $1.04 million. This means that many small businesses can immediately recover the costs of their investment. Additionally, if you take out a loan to pay for the project, you can fully deduct the interest expense. The most recent addition to this legislation, effective March 27th, 2020, made it so that commercial high-rise buildings are also eligible under section 168.
Cost Recovery Section 13201: Bonus Depreciation for All Businesses
In addition to the tax benefits for small businesses, The Coronavirus Economic Stabilization Act (CESA) of 2020 made changes to the 2017 Tax Cuts and Jobs Act (TCJA), offering incentives for businesses of any size to install fire sprinkler systems. This tax incentive applies to improvements made to the interior of existing nonresidential, commercial buildings.
Under the Cost Recovery Section 13201, businesses can still benefit from bonus depreciation, although the percentage has decreased:
- 2025: You can deduct 40% of the cost of the fire sprinkler system immediately.
- 2026: The deduction decreases to 20%.
- 2027 and beyond: The depreciation schedule is set at 15 years.
While the immediate deduction is less than in previous years, you can still significantly reduce your taxable income by installing or upgrading fire sprinkler systems. Additionally, the Modified Accelerated Cost Recovery System (MACRS) allows for larger tax deductions in the early years of the asset’s life, helping to offset the initial investment costs. 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.
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.