Commercial Air Conditioning, Commercial HVAC, Commercial Installations
Get a Big Tax Break When You Replace an R22 Air Conditioner
Last Updated on
Last Updated on January 15, 2020
Owners of commercial air conditioning systems: listen up! If your system has been giving you trouble, you may be thinking: should I replace my R22 air conditioner? If so, we have good news for you.
Thanks to the new tax laws, you can now get a big tax break when you install a new HVAC system. Typical savings can be at least $5000! Or much more for a large system. That can really help offset the cost to replace your R22 air conditioner.
The fact is, if your old air conditioner uses the refrigerant R22 (also known as Freon), you’ll be smart to replace it soon (more about that to come). And you’ll save money if you do it sooner.
Why it’s smart to replace your R22 air conditioner this year
Have you heard about the phase-out of the refrigerant called R22 or Freon, that was used in air conditioners for decades? If your air conditioner is more than 10 years old, it probably uses R22.
Well, it turns out that R22 is very dangerous to the environment. That’s why it’s being phased out as per regulations from the EPA. R22 can no longer be imported or manufactured in the U.S. as of January 2020.
What does that mean for your old air conditioner? A couple of things:
1. Very expensive repairs in the short term. If it’s been repaired recently, you probably noticed that the cost was very high. That’s because the cost of R22 has skyrocketed as production of R22 declines. The cause of the price hike is basic supply and demand. If adding refrigerant to your air conditioner is needed to make a repair (as it is for many types of repairs), that repair will get increasingly expensive.
2. Its days are numbered. After January 2020, your old R22 air conditioner can no longer be repaired if your service company can’t get R22. Before long you’ll be forced to replace any R22 air conditioners you have.
Think about that for a minute. Suddenly everybody with an old air conditioner that breaks will have to replace their R22 air conditioner. Consider what the demand for installing new air conditioners will be like.
Even now, the process for buying and installing a new AC unit can take weeks. Imagine how long it will take when you’re waiting in line with everybody else who is forced to replace an R22 air conditioner?
That’s why we recommend replacing your R22 air conditioner proactively (before peak season). You’ll save both time and money by getting ahead of the rush.
Here’s a resource that explains your options: R-22 Refrigerant Phase Out: Do You Need to Replace Your AC?
Now, let’s talk more about that tax break.
Reduce your tax bill when you replace your R22 air conditioner this year
The new tax law includes allows businesses to immediately expense heating, air conditioning and ventilation systems.
Under the new law, you can write off the entire expense of all components in the year you purchase them.That’s a big change from the old tax rules. That can amount to a tax break of $5000 or more for an average system! For a large commercial system with many components, the savings can be substantial.
Before the new law, you had to depreciate the cost of HVAC components over a period of 39 years. We wish the equipment lasted that long! Under the old accounting rules, your tax write off would be a few hundred dollars when you purchased an average $14,000 HVAC system.
Here’s an example from the Air Conditioning Contractors of America (ACCA):
“A restaurant owner installs a new heating and air-conditioning rooftop unit. The equipment and labor for installation cost $14,000. Under old depreciation rules, the restaurateur could only claim approximately $350 in depreciation expense annually over 39 years. Under the new law, she can deduct the full cost of the HVAC equipment
(including installation costs) of $14,000 from her business income the year of the purchase and installation. At the top marginal tax rate that would be applied to this purchase, this will save her $5,180 in taxes.”
The ACCA has also published a helpful infographic showing how business owners can save money with an HVAC system purchase under the new tax law. And, there’s a website about the Section 179 tax changes that provides sample calculations.
Get off the fence! Now’s the time to replace your R22 air conditioner
Here at Arista, we’ve been in this business for decades. There has never been a better time to replace your old air conditioner. With the phase out of R22 and the chance to get a big tax break, it’s really a no-brainer.
Our advice? Who knows when tax rules may change again. Take advantage of the opportunity to save big while you can!