New Tax Incentives for Security and Fire Protection Systems

The Tax Cuts and Jobs Act (P.L. 115-97) signed into law on Dec. 22, 2017, included two important changes to the U.S. tax code providing incentives for businesses to invest in new security, fire protection and alarm systems. These incentives were part of the broader effort in the new law to produce long-term economic growth by
encouraging business to make capital investments.

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, the integration within a building structure, whether the installation involves owned or leased property, and the
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 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.

Now qualified:

  • Fire-protection and alarm systems, including sensing devices, computer controls, sprinkler heads, sprinkler mains, associated piping or plumbing, pumps, visual and audible alarms, alarm control panels, heat and smoke detection devices, fire escapes, fire doors, emergency exit lighting and signage, and fire-fighting equipment, such as extinguishers and hoses
  • Security systems for the protection of the building and its occupants, including window and door locks, security cameras, recorders, monitors, motion detectors, security lighting, alarm systems, entry and access systems, related junction boxes, associated wiring and conduit

Disclaimer: Business tax deductions are complicated. The information included here is intended for general information only and is
not intended to be tax or legal advice. Please consult your tax professional before making business decisions that could affect your
tax situation. Each business situation is different and tax regulations change frequently.