HVAC Equipment Depreciation: Repair or Replace?

Although proper preventative maintenance of your building’s HVAC system will result in efficient performance and help extend its service life, there will inevitably come a time when you need to consider the economic and accounting benefits of replacing aging, depreciating equipment with a new heating
and air-conditioning system.

The CARES Act and HVAC

The CARES Act contains several tax savings benefits for businesses, including specific terms for HVAC and HVAC depreciation life – with the goal of enhancing Indoor Air Quality (IAC).

For example, under Section 168 of the tax code, the cost of all equipment and components of the “heating, ventilating, and air conditioning system” may be fully deducted for tax purposes in the first year. The CARES Act reduces the depreciation schedule to 15 years and creates a bonus depreciation that allows the taxpayer to take a full deduction of certain costs in a single year. The 100% bonus depreciation applies to qualified property acquired and placed in service before January 1, 2023*.

"The CARES Act reduces the depreciation schedule to 15 years and creates a bonus depreciation that allows the taxpayer to take a full deduction of certain costs in a single year."