As we gear up for Tax Day – which is on April 18th this year! – we’re doing a series of posts for the small business owners who most frequently come to us with questions. What kinds of industry-specific tax breaks can you expect this year? And how should you prepare? We’ll spill all the details below.
Construction, you’re up first!
You’ll be happy to know that the PATH (Protecting Americans from Tax Hikes) Act of 2015 has several segments that are especially relevant to the construction industry. Here are a few of the most important tax breaks you can expect this spring.
Bonus Depreciation/Section 179
If you’ve purchased new equipment in 2015, you’re in luck. Bonus depreciation allows you to deduct 50% of the amount you spent for equipment, while Section 179 allows you to deduct (instead of depreciate) the entire price of your equipment. Both of these provisions, of course, come with fine print: Bonus depreciation can’t be applied to used equipment, while Section 179 requires that your company had net income for the year.
These provisions would have normally expired at the end of 2014 – but thanks to the PATH Act, they’ve been reinstated. Bonus depreciation has now been extended through 2019, and Section 179 is now extended permanently. You can read more about these two provisions here.
You may also be able to take advantage of the Research and Development (R&D) credit, which was also permanently renewed thanks to the PATH Act. It’s available for certain construction or engineering developments (talk to us about your specific situation) and now – for the first time – allows eligible small businesses to claim the credit against the employer’s payroll liability or alternative minimum tax liability.
Section 179D Deduction
If you’ve worked on a government building project over this past year, the Energy Efficient Commercial Buildings Deduction may snag you a handy deduction of up to $1.80/square foot. Usually this provision accrues to the owner of the building, but in the case of government projects, there’s a special provision that allows the tax break to roll over to the contractor doing the project. How much of a deduction might you be eligible for? Use this handy calculator to find out.
Section 199 Deduction
Known as the “manager’s deduction,” Section 199 lets companies deduct up to 9% of income from certain construction or renovation projects. You can read more about that here.
Tangible Property Regulations (TPR)
These recently released deductions allow you to write off routine maintenance and repair expenses (sometimes). See if you qualify here.
Work Opportunity Tax Credit (WOTC)
You may be able to claim this credit if you’ve hired construction workers from certain disadvantaged groups, like ex-felons or qualified veterans.
Construction companies, we hope this makes you feel a little better about tax day!
If you have any questions about preparing your taxes, give us a call at 844-841-9857, or schedule a free consultation here.