DUMALUX

February 17, 2017

The Abandonment Tax Benefit allows property owners to write-off of discarded lighting when it is not identified as a separate asset of the books of the property.

Typically, lighting is included in the total value of a property and is not individually identified.

When you remove old lighting fixtures, the assets are abandoned and can be taken off a company’s books.

Abandonment involves calculating the book value of the discarded lighting, so that it may be written off as a tax deduction.

Abandonment Tax Benefit and Accounting

Recent changes to tax regulations allow disposal of individual building components where previously the IRS viewed a building as a single ‘unit of property’ (UOP).

The new regulations allow disposal of a smaller UOP provided a detailed cost segregation report has properly broken down individualized UOP within the larger unit.

These UOPs include lighting systems.

An Abandonment study will identify the value of the assets being discarded, and provide all of the documentation required for your corporate tax return.

Additional information needed would be the date the lighting was installed, the date of service, or the date of purchase for new construction.

Lighting being discarded may qualify for Abandonment if it was never segregated in the books of the property.

If the books reflect just the large asset, such as “Building”, the value of the lighting is included in the value of the building, and is depreciated with the property over 27.5 or 39 years.

Determining the undepreciated value of the lighting allows for its write-off when discarded.

Your accountant can give you more details about this tax benefit.

Please be sure to also inquire about the 179D Retrofit Lighting Tax Deduction.

With this benefit, business owners may qualify with a reduced installed lighting power under the interim lighting rule.

Energy simulations are required to show compliance with the energy and power cost savings requirements.