Posted by Jeffrey Feingold on 05.08.24
You may be surprised to find out that electrical contractors may be able to qualify for R&D tax credits. Most of America is. R&D tax credits aren't only for those developing new products. They also apply to new processes and to new designs. If you have come up with a new way of doing things in your company, you may qualify - even if others in your industry are already using the method.
Purpose of the R&D tax
The R&D tax credit is an incentive to improve the way we do things as well as to bring new products to market. It is a government encouragement for us to manufacture things in a smarter way with less waste, to install things in faster ways, or to design a smarter system. In these ways we can save energy, create jobs, and stay ahead of the technology curve.
Which electrical contractors qualify?
If you are doing normal installations, you don't qualify. Contractors that qualify have electrical engineers on board. They may be using a CAD/CAM system for design work, although this isn't necessary. The design changes may happen on the shop floor or at the building site. The question is are you making the product or process better? Are you improving production or lowering costs? Are you saving energy? It doesn't matter if other contractors are already using this new method. You don't have to be the first to use it. It simply has to be new to you for the IRS to reward you with tax savings. In fact, you could be the last company to implement a method and still qualify for tax credits! Tax credits reward the electrical contractors who are trying to give their customers a better building, or to do it in a better manner. The changes don't have to be dramatic. The improvements can be small. Examples include lowering the energy costs of a building, streamlining the installation process, or improving the way the building interacts with the environment.
Tax credit for the smaller companies
Federal and state R&D tax credits are available to companies of all sizes. You don't have to be a corporate giant with white laboratories to qualify. Many smaller companies don't claim the R&D tax credit when they could because they are unsure of the rules or are afraid of dealing with an audit. These tax credits provide needed cash to keep the doors open and the payroll funded for many small and medium size businesses in today's economy. The savings are in the hundreds of thousands of dollars for many businesses.
How to afford a tax lawyer
The big companies all have their own staff of tax lawyers, but what do the smaller companies do? Many of them hire consultants to do tax studies for them. These can get quite expensive. If you're looking for an alternative to a bigger, more expensive R&D study service provider, try Tax Point Advisors, Inc. We offer studies for half the fee of most other R&D firms. We are the only R&D provider with a industry-leading audit success to date. We have never had a client lose a credit under audit. Your assessment is free.
