New tax law allows fire sprinkler system installation and retrofits to be fully tax deductible.
The May 2020 Federal COVID-19 legislation has strengthened Small Business Section 179 expensing to include both new fire sprinkler installation and building retrofits. In the past, the cost of a fire sprinkler system upgrade was tax deductible over a 39-year depreciation schedule. With Section 179 expensing, these costs can now be fully expensed in the same year. In the past, small businesses were only able to fully deduct small equipment purchases like computers, and light duty vehicles that were used more than 50% of the time for business only use.
Section 179 expensing does not allow for the full deduction of sprinkler retrofits from converting commercial structures into residential buildings, but this permanent change in the provision can be utilized for any critical occupancies, including entertainment occupancies.
The time is now to upgrade your building’s fire safety with a fire sprinkler system or a sprinkler retrofit.
Under the new Section 179 guidelines, the one year deduction period phases out after 2022. Any new sprinkler system or retrofit completed between September 27, 2017 and December 31, 2022 will be able to be fully expensed in one year. After 2022, the allowed deduction percentage is as follows:
- 2023: 80%
- 2024: 60%
- 2025: 40%
- 2026: 20%
- 2027 and after: The depreciation schedule becomes permanently set at 15 years.
Expense amount increased.
In the past, the annual cap on purchases was set at $500,000 per year. With the addition of fire protection upgrades in Section 179, congress also increased the annual limit to $1 million.
Contact your tax expert for more information.
Municipal Benefits of Fire Sprinklers
- Businesses can move into different unprotected occupant spaces and get the fire sprinkler protection required under the code at full cost recovery!
- No need for code variances for political reasons.
- Your community and businesses will be much fire safer for your citizens, business owners and first responders.