New updates to the Section 179 Deduction, under the Tax Cuts and Jobs Act, has increased the amount of money that taxpayers are allowed to deduct (up to $1,050,000) on their 2021 income taxes as an expense, rather than requiring the cost of the property to be capitalized and depreciated.
As of Jan. 6, 2021, the Tax Cuts and Jobs Act expanded the definition of qualified property to includes improvements to commercial spaces and businesses. While this coverage extends to many areas of commercial property and supplies, today we’re going to focus on commercial roofing.
Tax law can be intimidating when you first start looking into it, but thankfully Section 179 is not as daunting as it may seem. Section 179 of the IRS Tax Code allows a business to deduct, for the current tax year, the full purchase price of equipment and off-the-shelf software that qualifies for the deduction.
Simply put, the US government wants businesses to invest in themselves, so if you purchase something for your business that qualifies, you can deduct the full price of that business purchase on your taxes of that same calendar year.
The list of qualifying purchases includes certain improvements to existing non-residential buildings like roofing, fire suppression, alarms, and HVAC. This updated Section covers many other qualifying purchases and investments in businesses, but we are excited to highlight that you can use the newly updated tax deduction for roofing improvements to non-residential facilities. These improvements include roofing repairs, waterproofing and even full reroof projects on existing buildings. Do note that these deductions shift and can improve given the level of energy savings to a building, and of course, come with some limitations.
Just like with any tax deduction there are limitations to think about with Section 179:
Final Amount – The dollar limitation has changed over the years, but as of January 6th, 2021, the dollar limit is $1,050,000 in spending on tax-deductible items.
Purchase Date – The equipment or new surfaces must be either purchased, financed, orleased and put into service between January 1 through December 31 of 2021.
If a taxpayer places more than $2 million worth of Section 179 property into service during a single taxable year, the Section 179 deduction is reduced, by the amount exceeding the threshold.
The amount allowed as a deduction can’t exceed the aggregate amount of taxable income for the business during that year.
We at Tredegar Construction understand that an investment in your commercial property can be a high expense, but if you are looking to reduce your tax burden while also reducing energy costs and improving the overall life of your commercial roof, 2021 is definitely time to take the plunge! Of course, always consult with your tax professional before taking the next step.