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 Small Business Expensing

Originally, small businesses were allowed to completely write off expenditures for computers, equipment, generic office supplies and even lighter vehicles (should their business require them) up to a $500,000 cap. After the 2020 Stimulus Bill, the cap has since been increased to $1,000,000 and now includes expenditures for fire protection for commercial buildings. However, this does not include retrofitting such systems in residential areas according to the NFSA. With the exception seemingly being entertainment venues with “critical occupancy”. In addition, these changes will be permanent, unlike the upcoming section 1320, who’s changes are temporary.

The Time Is Now

Time 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. The allowed deduction percentage is as follows:

• 2022: 100%
• 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.

Helpful Documents

• FACT Sheet
• Tax Filing Sample
• Tax Reform Info
• Tax Reform Flyer
• Tax Reform Postcard