With another tax season underway, those who work in the construction industry are likely seeking ways to reduce their tax liabilities. Fortunately, there are two great ways construction companies can save thousands to millions of dollars—the research and development (R&D) tax credit and the 179D energy tax deduction.
On Monday, January 13, 2025, Michigan Governor Gretchen Whitmer signed House Bills 5100 and 5101 into law, establishing a research and development (R&D) tax credit and creating an innovation fund. These initiatives are crucial for enhancing the state's economic development, and goes into effect for tax years beginning on or after January 1, 2025.
The rules surrounding R&D tax credits can be complicated and are continuously changing at the federal and state level. The IRS has recently proposed a change to Form 6765 - the form used to claim the R&D tax credit. This proposed change would introduce a new layer of complexity and require detailed project information to verify claims. IRS Federal Form 6765 is essential for claiming the Research and Development (R&D) Tax Credit, a vital incentive designed to encourage innovation and technological advancement in the United States. As businesses continue to evolve and compete in a global market, the R&D Tax Credit provides a significant opportunity for companies to offset some of the costs associated with their research and development activities. Starting with the tax year 2024, the form will reflect updated guidelines and specific criteria that taxpayers must adhere to in order to qualify for the credit, ensuring that businesses have a clear framework for claiming this benefit.
Choosing an R&D tax partner that can work seamlessly with your firm can offer great value to both your firm and your clients. Here are seven important qualities to keep in mind when choosing the right R&D expert.
Many companies that otherwise would qualify for valuable research and development (R&D) tax credits never bother to apply for them. What would cause a business owner to leave thousands or even millions of dollars on the table? The culprit is often the federal government’s requirements for the documentation of a company’s qualifying activities. While the need for documentation is certainly instrumental to the IRS’ approval process, the lack of understanding about what documentation entails needlessly keeps many out of the R&D credit arena.
Michigan House lawmakers took significant steps toward enhancing the state's economic landscape by advancing a comprehensive package of economic development bills to the Senate. This legislative suite is designed to implement a variety of financial incentives, including tax credits, tax exemptions, and grants aimed at supporting businesses throughout the state. Among the key components of the package is a proposed research and development tax credit, which aims to encourage businesses to increase their investment in R&D activities. This initiative would create a state-level tax credit that would be administered by the Michigan Department of Treasury. Currently, while research and development tax credits are available at the federal level, approximately 37 states have established their credits that align with federal criteria. Michigan's proposed credit is set to follow similar qualifying standards, focusing on a company's expansion of its research and development expenditures within the state. Eligibility will primarily depend on the potential for job creation, economic impact, and technological advancements.
Contrary to popular belief, a company does not have to manufacture an end product to qualify for tax incentives. Companies in the metal fabrication industry develop significant research and development (R&D) processes and process systems—activities that could qualify for valuable federal and state R&D tax credits.
If you knew you could save your business hundreds of thousands of dollars by doing what you already are doing, wouldn’t you jump at the chance?
Most companies are completely unaware that they can save significant money – even up near the seven-figure range – simply by applying for credit for activities related to research and development (R&D) they already are doing. In fact, most of our clients claim a gross credit of 10 percent of their R&D spend.
Does your manufacturing business resolve technological challenges through the innovative use of products and processes? Many manufacturers do not realize the R&D tax credit extends beyond basic research to include applied research.
Have any of your current clients constructed, purchased, expanded or remodeled real estate? If so, they may be eligible for ten, or even hundreds of thousands of dollars in tax savings through a cost segregation study. Tax Point Advisors works with CPA firms and business owners to coordinate cost segregation studies, to uncover potential tax savings and significantly increase cash flow through reclassification and depreciation of properties.
