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  • Coronavirus Aid, Relief and Economic Security (CARES) Act

2020 CARES Act: Say yes to critical facility upgrades

The Coronavirus Aid, Relief, and Economic Security (CARES) Act is an economic relief package that was signed into law on March 27, 2020. Under the CARES Act, a change was made to the Internal Revenue Code to assign a 15-year recovery period to Qualified Improvement Property (QIP). Businesses can now treat QIP placed in service after December 31, 2017 as 15-year property, which makes it eligible for 100% bonus depreciation, allowing taxpayers to take a full deduction for the cost of eligible QIP in a single year.

QIP refers to qualifying improvements made by a taxpayer to an interior portion of an existing building that is nonresidential real property, such as healthcare facilities, manufacturing plants, office and light commercial buildings, and material handling facilities. Under the CARES Act, qualifying improvements made to the interior of these facilities would qualify for a full tax deduction. 

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Eaton solutions that would likely be considered qualifying improvements include, but are not limited to:

It is important to emphasize that the CARES Act does not cover new construction, structural upgrades, external improvements (windows, roofing, etc.) or residential buildings.

There is no limit on the cost of equipment that can be expensed, and qualifying amounts may include the full cost of the equipment and eligible labor costs. Prior to the enactment of this provision in the CARES Act, QIP was required to be depreciated over a 39-year period and would not have been eligible for 100% accelerated bonus depreciation.

While business tax deductions can be a complex subject, it’s important to understand the benefits available. With this considerable savings, businesses have an easier time saying yes to critical facility upgrades that may have been more financially difficult to move forward with historically.

Please reach out to your local Eaton sales representative to discuss Eaton’s suite of innovative solutions or if you require support or strategy development around this initiative. 

Eaton does not provide tax advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on, for tax advice. Consult with your tax advisor to ensure that various criteria are met in order to claim this tax benefit.