MACC News: ACCA ALERT: Highlights For HVACR Contractors Of Fiscal Cliff Deal

ACCA ALERT: Highlights For HVACR Contractors Of Fiscal Cliff Deal

As everyone knows by now, Congress passed an agreement that will put off mandated cuts in federal spending and reinstate dozens of popular tax breaks that benefit individuals and small businesses. The deal came in the waning hours of the 112th Congress, but only temporarily solves some of the fiscal and budget issues facing the nation. In about two months the new Congress that is sworn in tomorrow will have to tackle the debt ceiling and fund the government for the third and fourth quarters of fiscal Year 2013.

The total package includes some spending cuts, modifications to existing and expired individual and business tax laws, an extension of unemployment benefits, and changes to farm policy.
It’s important to note that Congress did not extend the 2% payroll tax holiday for the employee portion of the Old Age, Survivors, and Disability Insurance (OASDI), that has been in place since 2010. Effective January 1, 2013, the OASDI tax rate for employees returns to 6.2 percent (and comparable return in the self-employment tax).
Below are some highlights of the Package for HVACR contractors:

  • The $500 25C tax credit for installing qualified energy efficient improvements, like a high efficiency furnace, central air conditioner, heat pump, hot water heater, or other measures, was extended retroactively for 2012 and through 2013.
  • The estate tax was made permanent with a $5 million exemption indexed for inflation, and a top tax rate moving from 35% to 40%.
  • The credit for the construction of energy-efficient new homes that achieve a 30% or 50% reduction in heating and cooling energy consumption relative to a comparable dwelling constructed per the standards of the 2003 International Energy Conservation Code (including supplements), is extended retroactively for 2012 and through 2013.
  • The 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements is extended retroactively for 2012 and through 2013, as long as they are placed in service before January 1, 2014.
  • The amounts and phase-out thresholds allowed under section 179 are modified for 2012 and 2013 to the levels in effect in 2010 and 2011 ($500,000 and $2 million respectively). Within those thresholds, a taxpayer could expense up to $250,000 of the cost of qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property. This proposal expires at the end of 2013 and the amounts revert to $25,000 and $200,000, respectively.
  • The temporary 50% bonus depreciation expensing for qualified property purchased and placed in service is extended through 2013. Taxpayers may also elect to accelerate some AMT credits in lieu of bonus depreciation. 
For a more detailed analysis of the entire legislative package approved by Congress, go to my Hot Air Blog here. If you have any questions, contact me at or 703-824-8841..
Charlie McCrudden
ACCA, Vice President of Government Relations