If you have been a business owner for a long time, you are probably familiar with the IRS' rules on depreciation for new equipment and building upgrades. In the past, business owners have had to depreciate new equipment such as LED lights over a number of years, rather than taking a deduction when they spend money. This has discouraged building owners from upgrading their lighting.
Recently, the IRS published new de minimis accounting rules. Under the new rules, new LED lighting which costs less than $2500 can be deducted from your taxes immediately. If you qualify as a small taxpayer -- one whose building has had an unadjusted basis of $1 million or less, maintenance repairs and improvements totaling less than $10,000 per year (or 2% of the building's basis, whichever is less) and total gross receipts of less than $10 million -- you may be able to deduct a more expensive lighting system. Your accountant can help you to file the required de minimis accounting statements alongside your tax return.
LED lighting is good for the environment and saves money. The energy efficiency of LEDs helps to keep your utility bills down and the long lifetime of LEDs helps to reduce the cost of maintenance.
New rules from the IRS mean that you can deduct the cost of equipment and many building upgrades now instead of depreciating them over a number of years. If you are considering adding or upgrading LED lighting, please contact us. This article is not tax advice; if you need tax advice, please contact your accountant.
