Tax season is upon us and the outcome for the tax extenders that expired Dec. 31st, 2014 remain unknown. So far, Congress has passed minimal tax legislation on the extenders package. Furthermore, the “courtesy disconnect” offered by the IRS has added to the difficulty of finding much guidance. As a way to help you begin your tax planning for the coming year while we wait for legislation, below is a list of items to consider in your year end tax planning:
Cost Segregation Studies:
If you have recently acquired a commercial property, a comprehensive cost segregation study will reclassify each building component into the appropriate tax life as prescribed by IRS guidelines. Certain qualifying portions of your building can be reclassified into 5, 7 and 15 year lives that are normally accounted for in 39 or 27.5 year categories. Learn how our approach and unique tax, energy, insurance deliverable is very different and realize the millions of dollars that are hiding in your building.
If you have undertaken demolition or renovated a building to tear out lighting, HVAC units, and other components, those assets can be abandoned or retired from the building. As such, their book value can be treated as a business deduction. The tangible personal property within the structure (or a part of it) allows for the remaining depreciable value (or basis) to be written off when the asset is retired, provided the personal property is no longer in service and was not purchased with the intent to demolish. This must be identified and valued prior to demolition.
Tangible Property Repair Regulations
Under the final regs, the IRS issued final guidance to taxpayers that refine and clarify the treatment of costs incurred for acquisition, repairs, or improvements of tangible property. This guidance constitutes a change for most taxpayers resulting in a tedious process of documentation now required for write-off’s over and above safe harbor limits. If applied correctly, these guidelines will provide additional write-offs, reduced tax liability, and a safer tax filing position.
Research and Development:
The Research & Development Tax Credit expired on Jan. 1, 2015 but benefits may still be uncovered through prior-year R&D activity. Additionally, many businesses should take advantage of the R&D tax credit as is honored by most states as well. Watch this video to learn more:
You don't need to be a high tech manufacturer to qualify. In reality contractors, job shops, tool & die shops and plastic mold injection companies are all potentially viable candidates. The savings can be significant if taken properly.
199 Domestic Production Activities Deduction:
The deduction was initially aimed at manufacturing businesses, but it also benefits construction firms, architectural and engineering firms, agricultural and mining enterprises, and numerous other businesses. Basically, if a taxpayer adds value to a product in the U.S. and then sells, leases or licenses the product, it is likely eligible for this deduction under code Section 199.[hr]
If any of these tax deductions or credits are calculated incorrectly or lack substantiation, your business could face additional taxes, penalties, and interest. ETS can help ensure your company claims the maximum tax benefits under the guidelines while following the strict rules of the IRS. Contact ETS for a complimentary benefit analysis, 800-236-6519.