Section 179 Tax Deduction for Commercial Buildings

Note: This article was last updated on 8-15-2023.

Are you thinking about investing money in your business? You couldn’t have picked a better time!

A recent change to the Section 179 Deduction, under the Tax Cuts and Jobs Act, has increased the amount of money that taxpayers are allowed to deduct (up to $1,160,000) on their 2023 income taxes as an expense, rather than requiring the cost of the property to be capitalized and depreciated.

As of Jan. 6, 2021, the Tax Cuts and Jobs Act has expanded the definition of qualified property that is eligible for expensing under Section 179 Tax Deduction; this includes improvements to commercial roofing.

Section 179 Explained

It may seem daunting when you start looking into tax law, but Section 179 is not as complicated as it may seem. Section 179 of the IRS Tax Code allows a business to deduct, for the current tax year, the full purchase price of equipment and off-the-shelf software that qualifies for the deduction.

Simply put, the US government wants businesses to invest in themselves, so if you purchase something for your business that qualifies, you can deduct the full price of that business purchase from your taxes for that same calendar year.

Section 179 Calculator

What Qualifies?

The Section 179 Tax Deduction covers business supplies, upgrades, improvements, and property that is purchased or leased in the same calendar year. Since the deduction was created with all businesses in mind, the list includes purchases that many companies need.

The list of qualifying purchases includes, but is not limited to:

Certain improvements to existing non-residential buildings: roofing, fire suppression, alarms, security systems, and HVAC.

Equipment (machines, etc.) purchased for business use

Business Vehicles with a gross vehicle weight of more than 6,000

Computers and “Off-the-Shelf” Software

Office Furniture and Equipment

Property attached to your building that is not a structural component of the building (e., a printing press, large manufacturing tools, and equipment)

Limitations

There are a few limitations to consider with the Section 179 tax deduction:

Dollar Amount – The dollar limitation has changed over the years, but after the most recent update (as of September 11th, 2023) the dollar limit is $1,160,000.

To qualify for the Section 179 deduction for any given tax year, the equipment must be purchased (or financed/leased) and placed into service between January 1 and December 31 of that year.

The amount allowed as a deduction can’t exceed the aggregate amount of taxable income for the business during that year.

Using Section 179 for Commercial Roofing

While Section 179 covers many purchases and investments in businesses, we are excited to highlight that you can use the newly updated tax deduction for roofing improvements to non-residential facilities. These improvements include roofing repairs, waterproofing, and even full reroof projects on existing buildings.

Here is an example of how 179D works when the new roof provides a 10% energy cost reduction (all credit is given to Facilities.net):

Assume a $250,000 initial investment for a roof replacement or recovery project, assuming $6 per square foot for a 41,500-square-foot roof area.

Also assume that the roofing upgrade achieves a 10 percent savings in energy costs and therefore qualifies for a $.60 per square foot tax deduction. That provides a $24,900 tax deduction.

• The bottom line is a $225,100 investment after the tax deduction.

Here is an example of how 179D works when the new roof provides a 50% energy cost reduction (all credit is given to Facilities.net):

Assume a $250,000 initial investment for a roof replacement or recovery project, assuming $6 per square foot for a 41,500-square-foot roof area.

Also assume that the roofing upgrade achieves a 50 percent savings in energy costs and therefore qualifies for a $1.80 per square foot tax deduction. That provides a $74,700 tax deduction.

• The bottom line is a $175,300 investment after the tax deduction.

Section 179D proves to be an excellent opportunity to take advantage of the all-time high deduction to solve problems with your roof.

You can solve your leaking roof problems and be able to write off your contractor bill as a tax deduction …what could be better than that?

Want to learn more about commercial roofing?

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