2020 CARES ACT TAX BENEFITS

Upgrade or Replace Fire Protection & Life Safety Systems with Tax Savings Opportunities

The 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act provides a number of tax savings for businesses.  This includes a change to the tax code to ensure “qualified improvement property” (QIP) investments can be from an accelerated tax deduction for the full cost of such property. 

Under Section 168 of the tax code, the cost of fire protection and life safety systems can be fully deducted for tax purposes in the first year it’s placed in service versus over the traditional 39-year period.  For commercial buildings, the cost of fire protection and life safety systems placed into service in 2020 may be fully deducted as a business expense. 

How it works*

For example, a business owner installs new fire protection products with equipment and installation costs of $1,000,000.  Under previous depreciation rules, the business owner would claim approximately $25,641 in depreciation deductions every year for over 39 years, for a year 1 net equipment cost of $990,513.

Under the new CARES Act, the building owner may deduct the full equipment and installation cost of $1,000,000 for a year 1 net equipment cost of $630,000.

*Note: The information included here is intended for general information only and is not intended to be tax or legal advice.  Please consult with your tax professional before making business decisions that could affect your tax situation.  Each business situation is different and tax regulations change frequently. 

Fast Facts:

  • Cost of equipment and labor are considered to be part of the full taxable deduction
  • Applied to existing interior of commercial or non-residential buildings
  • Does not apply to new construction
  • No limits or caps on the amount of product purchased for QIP
  • Can retroactive prior QIP costs incurred back to January 1, 2018

To learn more about the CARES Act, visit home.treasury.gov/fedresponse

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