Despite changing economic conditions and evolving regulations, several tax advantages remain consistent for manufacturers and contractors. Here are five key tax breaks that can help reduce tax liabilities, improve cash flow, and better navigate financial uncertainties.
Cost Segregation Studies
Cost segregation allows businesses to accelerate depreciation on buildings by reclassifying certain components, such as equipment and improvements, into shorter depreciation periods. This strategy can provide substantial savings by allowing businesses to recover costs faster, potentially through bonus depreciation.
Research and Development Tax Credit
The R&D tax credit is available to businesses that develop, design, or improve products, processes, or software—not just those involved in laboratory work. Eligible companies can receive credits against income or payroll taxes by meeting criteria related to technological uncertainty and experimentation.
Fuel Tax Credits
Businesses that use gasoline or diesel in off-highway vehicles can claim the Credit for Federal Tax Paid on Fuels, which helps recoup taxes on fuel not used for highway maintenance. Additionally, businesses that use alternative fuels like biodiesel or propane can take advantage of credits ranging from $0.50 to $1.00 per gallon, with an extended deadline through December 2024.
Employment Tax Credits
Several employment tax credits can benefit manufacturers and construction companies. For example, the Empowerment Zone Employment Credit offers employers up to 20% of wages paid to employees in designated zones. The Work Opportunity Tax Credit provides incentives for hiring individuals facing employment barriers, such as veterans or ex-felons.
State Tax Incentives
Many states offer unique tax incentives that can reduce state liabilities. These may include job creation credits or innovation incentives like R&D tax credits. Manufacturers and contractors should explore state-specific programs, as they can be valuable tools for reducing overall tax burdens, particularly if they are expanding or relocating their business.
By taking advantage of these opportunities, manufacturers and contractors can save money, improve financial stability, and ensure they are optimizing available tax benefits.
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Written by the Digital Marketing Team at Creative Programs & Systems: https://www.cpsmi.com/.