Infrastructure development powers our economy and shapes our communities. From roads and bridges to ports and utilities, these projects connect people while fueling progress and prosperity. However, their scale and impact come at a cost, especially for companies taking on major infrastructure projects.
Luckily, federal and state governments offer an array of tax incentives to help offset expenses. Today’s blog post provides guidance on achieving tax savings for infrastructure projects. We'll explore key programs and strategies to help your business capture every possible deduction and credit.
With smart planning, you can stretch your infrastructure dollars further while completing projects that improve the places we live and work. Read on to start maximizing savings!
Tax Challenges in Infrastructure Projects
Taxes can present a significant challenge for major infrastructure projects. Navigating federal, state and local tax codes is as crucial as it is challenging. However, understanding how to maximize tax savings for infrastructure projects can divert millions back into your project budgets. Some of the most common tax traps include:
- Asset classification: Infrastructure assets like pipelines or power lines have specific tax treatments. Incorrect classification leads to higher taxes, so it pays to work closely with tax pros to assign the right asset types.
- Missed credits: Many federal, state and local incentives reward infrastructure investments, but the system is complex with lots of limitations and deadlines.
- Compliance issues: Infrastructure projects have various permitting, licensing and regulatory requirements. Falling short on compliance can trigger serious tax penalties.
The cost infrastructure taxes done wrong can divert millions from project budgets, but careful planning and advice from specialized tax advisors can uncover major savings. Tackling taxes proactively smooths the way for building infrastructure that drives growth.
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Tax Credits and Incentives for Infrastructure Projects
At the federal level, several opportunities offer tax savings for infrastructure projects, including:
- Energy efficiency deductions: The 179D deduction rewards energy-efficient design in commercial buildings. Meeting set requirements can trigger significant deductions.
- Renewable energy credits: The Investment Tax Credit (ITC) offers credits for up to 30% of the cost of qualified renewable energy installations like solar, wind and geothermal systems.
States and municipalities also incentivize infrastructure through credits, grants, discounted fees and other benefits. These are based on local priorities and regulations, so it pays to research what's available. For example, some states offer sales tax exemptions on equipment and machinery for utility and transportation projects.
Strategies to Maximize Tax Savings for Infrastructure Projects
With smart planning, companies can unlock major tax savings for infrastructure projects. Here are some key strategies:
- Map it out early: Tax incentives and credits vary based on project type and location, so working with tax advisors early in the planning stage allows you to identify opportunities and integrate tax planning into the full project.
- Segregate costs: Cost segregation allows you to reclassify assets to accelerate depreciation deductions.
- Capture R&D credits: Many infrastructure projects involve substantial engineering, design and technology development. Identifying qualifying R&D activities lets you monetize innovation through tax credits.
- Stay compliant: Incentive programs have strict requirements. Meticulous documentation and compliance helps avoid messy audits and penalties later on.
Get Started Now
Taxes will always play a role in infrastructure, but with smart planning, they don't have to be a barrier. The tax pros at ETS are here to help you identify all applicable tax incentives and prepare comprehensive documentation to maximize tax savings for infrastructure projects.
Ready to uncover savings for your next infrastructure project? Contact our team to start planning. Our goal is to pave the way for profitable projects that improve lives.
