Posted by Jeffrey Feingold on 08.17.22
Research and Development Tax Credits Doubled for Certain Taxpayers
R&D Credit, Small Business Credit Against Payroll Tax
Under the new law, the maximum R&D Tax Credit which can be utilized to lower payroll taxes doubles for tax years beginning after December 31, 2022. Eligible small businesses can now reduce payroll taxes by up to $500,000 annually, doubling from the prior limit of $250,000. Another significant enhancement is that the credit can be utilized to reduce the Medicare portion of taxes (before the new law, the offset was only allowed against Social Security tax. Taxpayers with credits in excess of tax liability may carry forward unused credits.
Energy Efficiency Credits and Deductions Enhancements
Section 179D
Tax deductions under Section 179D have been increased substantially, from the current 2022 maximum of $1.88 per square foot, to $5 per square foot, applicable to construction of energy-efficient commercial buildings. Also included are multifamily buildings, four or more stories high. Energy-efficient construction, including retrofitting of older buildings, will qualify. Real estate investment trusts will also be allowed to benefit from 179D tax deductions.
Another beneficial change is that tax-exempt building owners will be allowed to allocate 179D tax deductions to engineers, designers or architects who design energy efficient systems.
Section 45L
45L tax credits have been extended for 2022 and will remain available through 2032, a substantial win for developers and homebuilders. The credits had expired in 2021 but the extension is retroactive.
Current energy efficiency criteria, as well as the $2,000 per unit tax credit, remain in place this year. As of 2023, the tax credit increases to a maximum $5,000 per single-family unit as well as for multifamily developments. Energy efficiency criteria will be modified to be in accordance with Department of Energy’s Energy Star programs, as well as for zero energy ready homes. This modification will make all residential developments eligible, instead of being available only for low-rise residential developments as in the past.
Corporate Alternative Minimum Tax – Few Corporations Affected
Only applicable to companies with average income in excess of $1b per year.
General Business Credits, including Research Credit may be applied against this Tax.
Questions about the new tax law and the potential benefits for your business? Call Tax Point Advisors. We can help with your 2023 tax planning and assess potential benefit for these and many other tax credit and incentive programs. Call us at 1-800-260-4138, or contact us at www.taxpointadvisors.com.
