Whether you are an established owner of an HVAC company or are just in the beginning stages of running your business, saving money and spending it wisely matters. Tax season is synonymous with owing money, however, if you are a business owner, one of the perks of tax season is that you have a lot of tax deductions at your fingertips which can help you to save in the long run. At Barta Busines Group, an accounting and bookkeeping firm for small businesses, we have put together a list of tax deductions for HVAC companies that you need to take advantage of.

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Taxes are a tricky endeavor for any business or individual. If you are the owner of an HVAC company or an HVAC contractor, there may be some extra steps you can take this tax season to help save you money. With the guidance of Barta Business Group, small business accounting services in Colorado, we will take a look at top tax strategies for HVAC companies. Specifically, with section 179.

What is section 179?

Section 179 is a type of tax deduction that allows small and medium businesses to deduct property of equipment expenses, up to $1 million as of 2018. What this means is that businesses can write off the entire cost of assets purchased for their business in order to significantly lower taxes in the year the equipment is purchased. The purpose of Section 179 is to encourage small and medium business owners to buy equipment and property and invest in themselves.

Does HVAC Equipment Qualify under Section 179?

As of Jan. 1, 2018, new and used heating, ventilation and air-conditioning property are now qualified as Section 179 expenses by the IRS. Before 2018, HVAC equipment was defined under the law as a capital improvement to a building rather than a business expense and thus, did not qualify for tax breaks. Now, business owners can deduct the full cost of their HVAC equipment the same year the equipment is purchased. 

With businesses now able to claim HVAC expenses with Section 179, they are more likely to invest in an HVAC purchase and hire a contractor for the job.

Expand Your HVAC Business with Section 179

The updated tax law presents a great opportunity for the HVAC industry, as customers will be more likely to invest in new HVAC equipment. Many business owners though might not be aware of this, so it is a good idea to let these companies know of the savings to help them make their decision of whether to invest in HVAC work.

Purchase Equipment for your own business using Section 179

In addition to expanding your customer base, you can also deduct the cost of purchases for your own business. As an independent contractor or small business owner, you likely have business tools, machinery, and even vehicles you can expense. In order to claim these purchases, though, make sure to follow these steps:

1. Document all purchases or rental dates, as well as the dates your equipment was put into service. Assets much be purchased and put into use in the same tax calendar year. In other words, don’t purchase a vehicle before December 31 with the intention of using it the following calendar year. 
2. Understand Section 179 qualifying property. Most equipment and tangible personal property used for business qualify for the deduction, including machinery, tools, business vehicles, computers, office furniture and more. Products can be new or used, but they must be purchased for business from the start. This means you can’t convert personal equipment to business equipment and then file for the deduction. For example, you qualify for a tax break if your car is used for business over 50 percent of the time. 
3. File Form 4562. To take the Section 179 deduction, simply fill out Part 1 of IRS form 4562. 
4. Be Prepared for a Tax Audit. In case of a tax audit, be sure to always find ways to prove your vehicle or equipment is used for business purposes. For example, track mileage and expenses. 

Section 179 deductions can encourage business owners to invest in your services as an HVAC contractor. Keep your customers informed of the tax savings they could have by using your services. 

About Barta Business Group

Most businesses are great at their craft, but not great at the financial back of the house. At Barta Business Group in Denver, CO Our team of bookkeeping, accounting, and finance professionals guides business owners in making better decisions, so they can focus on doing what they love in their business. We understand the peace of mind that comes from knowing your financial information is done right every time. We value being able to support businesses in turning financial data into actionable insights, so you may plot a course for your company’s future with confidence.