Commercial Security System Tax Deductions Available
Are you hesitant to get a security and fire alarm system for your business due to cost? The Tax Cuts and Jobs Act (TCJA) provides tax incentives for companies who invest in new or used security systems and fire alarm systems. Thanks to this incentive, companies can reduce their cost basis of purchasing security equipment by thousands of dollars.
Note: Tax law is complicated. The information presented below is intended as general information only and is not tax advice. Speak with a tax professional for more details.
Section 179 of the TCJA allows businesses to deduct the cost of fire and security systems, and other equipment, up to a total of $1,050,000 in 2021.
The TCJA allows businesses to deduct equipment expenses up to $1,050,000. However, there are limits to this tax incentive. The maximum equipment investment for which you can receive the full deduction is capped at $2,620,000. The deduction phases out dollar for dollar over $2.62 million—at $3.67 million, the deduction goes away. The law is intended to help small- to medium-size businesses. But as you can see, there is a lot of room for capital investments before you hit the max deduction.
The TCJA deduction is intended to allow for equipment depreciation deductions upfront. Rather than paying for a new piece of equipment upfront and then only realizing a small deduction each year for the equipment’s depreciation, you can deduct the future depreciation in the same tax year as you bought it.
You get to reduce your cost basis right away instead of reducing it gradually over time.
Security systems and fire alarm systems are considered qualified equipment under Section 179.
All businesses that purchase or finance “new to you” equipment during the 2021 tax year are eligible to take advantage of Section 179’s tax incentives. New to you equipment includes used equipment—used equipment will qualify as long as it is new to the company that purchases and uses it in 2021.
Before the TCJA, security and fire alarm systems were considered “building improvements” and would be ineligible for deductions. This is no longer the case. Security systems are now qualified equipment under Section 179.
Fire alarm systems & components eligible for Section 179’s tax incentives include:
- Sensing devices
- Computer controls
- Visual and audible alarms
- Alarm control panels
- Heat and smoke detection devices
- Sprinkler heads, mains, and associated piping or plumbing
Security systems & components eligible for Section 179’s tax incentives include:
- Security cameras
- Access control systems
- Window and door locks
- Motion detectors
- Burglar alarm panels
- Wiring associated with system installation
Using Section 179, businesses can get fire alarm systems and security systems at a lower cost.
The cost of security equipment varies depending on many factors, including building size and security system type. You must also factor in labor costs associated with system installation. The good news is that both equipment and installation costs can be deducted under Section 197.
Below is an example of how much a business may save if they purchase a security system at a total cost of $25,000 in 2021 and subsequently take the tax deduction.
|Total Equipment & Installation Cost||$25,000|
|Tax Deduction Allowed||$25,000|
|Cash Savings (assuming 35% tax bracket)||$8,750|
|Total Cost After Incentive||$16,250.00|
In the example, you’d realize nearly $9,000 in savings. That is a big chunk of change! There are other savings to be had as well. For larger businesses that invest in a security system and other equipment totaling more than the maximum deduction of $1,050,000, you may be able to take advantage of bonus depreciation as well. This allows you to recoup even more of your investment the year you purchase it. You should consult with your accountant as to the best way to reduce your tax liability.
If you are thinking about a security or fire alarm system for your business, reach out to local security companies. Talk to them about your needs and learn what equipment and services they offer. Then, get a system quote and plug it into this calculator to estimate how much you can save!