Tax Incentives for the Design & Build Industry
As an architect or engineer, there are a number tax incentives available to better your bottom line as well as help your commercial property owner clients who are also eligible for the same tax incentives. Leveraging these tax tools will allow you to better position yourself in the marketplace, win more bids because of it, and set yourself apart as a valued advisor to increase customer satisfaction and loyalty! We've highlighted a few here for you:
Architects and designers are eligible for a Federal tax benefit of up to $1.80 per square foot for the design of energy-efficient public buildings. You'll receive increased cash flow through direct allocation for the design of energy efficient systems in new or existing public buildings owned by the federal, state, and local government.
Benefits originally awarded to architects and designers through the Energy Policy Act of 2005 have recently been extended until December 31, 2016 with the efforts and support of the American Institute of Architects (AIA). If you have installed energy-efficient lighting, HVAC systems, or building envelope components (roof, windows, insulation) since 2006, click here to assess your eligibility for significant savings.
How Energy Benefits Your Clients:
Architects and designers are experiencing positive effects as a result of the Energy Policy Act’s extension.
- Increased satisfaction from commercial-building-owner clients who are eligible for a tax benefit of up to $1.80 per square foot for the installation of energy-saving systems into new or existing construction.
Important: the energy tax certification also helps clients reduce property and casualty insurance premiums.
- Increased cash flow through direct allocation of the federal tax benefit (a partial deduction of $0.60 per square foot) to private property clients for the installation of energy-saving lighting systems in new or existing buildings or to designers for public buildings owned by a federal, state or local government.
If your Architectural or Engineering Firm is spending more time focusing on sustainable and green designs to incorporate into building features, then you may be eligible to benefit from the Research and Development Tax Credit. Expenses associated with the development of individually unique functional and energy-efficient designs meet the requirements of the IRS R&D Tax Credit. For Engineering firms, focus is on activities in design and development in structural, mechanical, and electrical systems for unique buildings & structures.
To qualify for the credit, your firm must develop a new or improved business component based on technology grounded in the physical sciences (such as engineering principles, biology, chemistry, and/or computer science). There must also be uncertainty associated with the project, and a process of experimentation and testing to resolve the uncertainty.
What is 199 DPAD?
The Domestic Production Activity Deduction (DPAD) allows businesses such as those in construction, architecture or engineering, with qualified production activities, to take a tax deduction from net income. It is a highly beneficial tax benefit for growing active engineering and architectural firms engaged in production activities. This tax benefit can be implemented on both private and public activities.
Engineering and Architectural services performed on real property in the US for a construction project on a regular basis is considered a suitable activity. Suitable deductions include leases, rentals, licenses, sales, exchanges or other dispositions. Construction of and/or Engineering or Architectural Services performed in relation to property in the US.
Construction Tax Planning
Construction Tax Planning uses a proactive approach to identifying additional tax benefits related to new and planned construction projects. Accelerated deductions are identified by analyzing costs and documenting their design and construction based on federal guidelines that define tangible property from the stages of a construction project.
Items to be considered for optimal benefits include interior walls, ceilings, flooring, misc. finishes, warehouse applications, HVAC, plumbing, electrical, building attachments and typical site improvements.
Our construction tax planning engagement team will analyze I.R.C. Sec. 174 embedded costs, indirect costs, and professional fees (soft costs), during the planning and design phases of a construction project, allowing for an immediate tax deduction in the year the cost is incurred. Additionally, working with a specialty tax engineering firm in the pre-design phase will allow for the proper identification of materials and methods, direct and indirect, that maximize personal property and land improvements that qualify for accelerated depreciation deductions.
LEED for New Construction & Major Renovations
LEED is a benchmarking and design assistance tool for building owners, designers, and construction professionals. It recognizes and rewards choices that improve the environmental performance of buildings.
Although LEED is primarily focused on design and construction, LEED for new construction also helps lay the foundation for sustainable operations and maintenance practices once the project has been completed. Upfront planning for green operations and maintenance can help building owners and operators ensure that the building performs to its full potential.
Building commissioning is the process of verifying, in new construction, that all the subsystems within a building such as HVAC, plumbing, electrical, building envelopes, etc. achieve the project requirements as intended by the building owner and as designed by the building architects and engineers. LEED requires building commissioning as a cost-effective means of improving their energy efficiency and ensuring their safe and efficient operation over time. On-going commissioning helps sustain those improvements throughout the life of the building.
Contact ETS for more information: