Recently, the Security Industry Association (SIA) did a thorough explanation of the tax incentives the Tax Cuts and Jobs Act changes to claims for security and fire protection systems with a fact sheet. In it there is a helpful explanation to businesses looking to upgrade security or looking to inform a possible client to how the Tax Cuts and Jobs Act changes the way security and safety upgrades are to be considered by the tax code in 2018.
The full document from Security Industry Association is available for download here. Below are a couple of excerpts from that document:
The Tax Cuts and Jobs Act, which was signed into law on December 22, 2017, included important changes to the U.S. tax code that provides incentives for businesses to invest in new security, fire protection and alarm systems.
Generally, the costs of commercial-use security, fire protection and alarm systems are capitalized and depreciated over a recovery period of five, seven, 15 or 39 years, dependent on factors such as the type of system purchased, integration within a building structure, whether the installation involves owned or leased property, and its relationship to business activity.
Beginning in 2018, the new tax law allows many businesses to write off the full cost of such systems as an expense for the tax year they were placed in service, eliminating the capitalization requirement.
Section 179 Expensing
Previously small- and medium-sized businesses could deduct most business-related equipment (excluding Security equipment) placed in service during a year, up to $500,000 not exceeding taxable income (subject to carryover rules).
For the first time, and on a permanent basis, security systems and fire protection and alarm systems are now treated as qualifying Section 179 property under the law, despite being considered building improvements (real property). See 26 U.S. Code § 179.
Additionally, businesses can now deduct up to a total of $1 million in purchases that qualify for Section 179, doubling the dollar limit. This deduction phases out on a dollar-for-dollar basis after a business has $2.5 million in total qualifying purchases, reaching zero at $3.5 million. After 2018, the increased limit and phaseout threshold are indexed to inflation.
Beginning in 2018, qualifying businesses can now deduct the costs of new security and fire protection systems, up to a total of $1 million under Section 179, which were not eligible prior to the new law.