The voluminous changes in the Tax Cuts and Jobs Act (TCJA) leave taxpayers uncertain about the future on tax credits and deductions. Typically creating unforeseen obstacles, there are now unprecedented opportunities for many taxpayers as it relates to R&D tax credits. The two most power tax incentives we’ll discuss here are the R&D Tax Credit and 179D Energy Efficient Commercial Building Deduction.
R&D Tax Credits for Construction
Whether you are a general contractor or specialty subcontractor, you could be eligible for significant R&D tax credits. Check out this video for more on how to qualify. It’s common for our mid-sized construction clients to see $50,000 or more per year in net federal credits.
S-Corps & Partnerships: The credits are stronger post-TCJA
S-Corps and partnerships will see an effective net credit increase of up to 21 percent when electing the 280C reduced credit election in tax year 2018 or thereafter! See this informative article for more detail on this.
For C-Corps, the credits are now almost five times more powerful than deductions due to the new 21 percent tax rate! While C-Corps got a nice tax rate reduction for tax year 2018 going forward, they also lost the 199 DPAD deduction and will not see any benefit from the 199A passthrough qualified business income deduction. We’ve seen an unprecedented uptick in C-Corp taxpayers express a newfound interest in R&D tax credits than ever before.
Many construction companies set up as Employee Stock Ownership Plans (ESOPs) see no federal tax imposed, and therefore typically see no benefits from R&D tax credits. However, we increasingly see many states taxing ESOPs as any other company. But almost 40 states have R&D tax credits that are similar to or mirror the federal R&D tax credit. In the last twelve months, we’ve seen an unprecedented uptick in ESOPs taking advantage of the R&D tax credit to reduce state tax liability.
179D Energy Efficient Building Deduction for Construction Companies
The 179D deduction provides a tax deduction of up to $1.80 per square foot of commercial buildings. Designers and builders of government-owned buildings may receive the allocated deduction (in whole or part) if they were involved in the design and/or construction of energy efficient systems, such as HVAC, lighting, and envelope systems. See this video for more on how to qualify.
Because receipt of this deduction must come from an allocation letter the government signs, we strongly encourage companies to reach out to us soon to see if they qualify. Other firms in the chain of design and construction may have the same idea — then it becomes a race to the finish line.
A Helping Hand
At BRAYN Consulting LLC, we work collaboratively with your CPA firm to assist in the review, documentation and substantiation of the tax incentives specific to your business. We build quality relationships where we are a key partner in driving business prosperity.
We would love to hear from you! Please reach out to see if you qualify for these incentives or for a competitive bid: (888) 773-8356 or firstname.lastname@example.org.