Plumbing and HVAC Equipment and Vehicle Deductions: Section 179, Service Vans, and Tools

Plumbing and HVAC businesses are capital-intensive compared to most service businesses. A single service van costs $35,000-$55,000. A sewer camera system costs $5,000-$15,000. An HVAC recovery machine costs $1,500-$3,000. A hydro-jetting machine costs $10,000-$25,000. Diagnostic tools, pipe threading machines, brazing equipment, and specialized hand tools add up quickly. The tax code offers immediate deduction for most of these through Section 179 and bonus depreciation, rather than spreading the deduction over the asset’s useful life.

How does a service van purchase work for taxes?

What about tools and small equipment?

The IRS allows a de minimis safe harbor election for items costing $2,500 or less per item (or $5,000 per item if the taxpayer has an applicable financial statement, such as audited financials). Under this election, items below the threshold are expensed immediately without needing to use Section 179.

For plumbing and HVAC businesses, this covers most hand tools: pipe wrenches, tubing cutters, flaring tools, multimeters, manifold gauges, and similar items. A $200 pipe wrench is expensed immediately. A $4,500 sewer camera exceeds the de minimis threshold and should be claimed under Section 179.

Larger equipment typically claimed under Section 179:

• Sewer camera systems: $5,000-$15,000
• Hydro-jetting machines: $10,000-$25,000
• Pipe threading machines: $3,000-$8,000
• HVAC recovery machines: $1,500-$3,000
• Mini-excavators (for trenching): $20,000-$50,000
• Diagnostic equipment: $2,000-$5,000

What about the UBIA benefit for QBI?

Equipment purchased under Section 179 still has UBIA (unadjusted basis immediately after acquisition) for QBI purposes. The UBIA is the original cost of the asset, and it supports the QBI deduction above the threshold through the “25% of W-2 wages + 2.5% of UBIA” alternative test. UBIA is counted for the longer of the asset’s MACRS recovery period or 10 years.

A plumbing company with $200,000 in equipment UBIA gets an additional $5,000 (2.5% of $200,000) added to the W-2 wages test. This matters for high-income owners whose QBI deduction might otherwise be limited by the W-2 wages cap.

What is bonus depreciation and how has it changed recently?

Bonus depreciation allows you to deduct a large percentage of an asset’s cost in the first year, rather than spreading it over the full MACRS recovery period. Under the Tax Cuts and Jobs Act, bonus depreciation was 100% for assets placed in service from September 27, 2017 through December 31, 2022. It began phasing down by 20% per year: 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and 0% in 2027. Unlike Section 179, bonus depreciation can create or increase a net operating loss, which you can then carry forward to offset future income. Bonus depreciation applies to new and used property (the TCJA removed the new-only requirement), as long as you have not previously used the asset.

Related guides:

• Plumbing and HVAC Business Entity Structure: LLC, S-Corp, and the QBI Advantage
• Estimated Taxes for Plumbing and HVAC Businesses: Seasonal Revenue and Emergency Call Income
• Plumbing and HVAC Insurance and Bonding: Requirements, Costs, and Tax Deductions
• Retirement Plans for Plumbing and HVAC Business Owners: Solo 401(k), Safe Harbor, and Union Considerations
• Plumbing and HVAC Worker Classification: Apprentices, Journeymen, and Subcontractors

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.