[vc_row bg_image=”15695″ top_padding=”300″ bottom_padding=”110″ bg_position=”center center”][vc_column width=”1/1″][minti_headline font=”font-special” size=”fontsize-xxxxl” color=”#ffffff” weight=”fontweight-700″ lineheight=”lh-12″]Some Contractors Don’t Give Themselves Enough Credit[/minti_headline][vc_column_text]

By Joseph Molloy
Construction Tax Director

Grassi & Co.

[/vc_column_text][/vc_column][/vc_row][vc_row type=”full_width_section” bg_position=”left top”][vc_column width=”1/1″][minti_spacer][/vc_column][/vc_row][vc_row top_padding=”0″ bottom_padding=”50″][vc_column width=”1/4″][/vc_column][vc_column width=”3/4″][/vc_column][/vc_row][vc_row top_padding=”0″ bottom_padding=”50″][vc_column width=”1/4″][vc_column_text][/vc_column_text][/vc_column][vc_column width=”3/4″][vc_column_text]If you are a specialty contractor responsible for functions such as plumbing, HVAC, electric or sheet metal work, or if you are a contractor that performs value engineering, you may be able to take advantage of some often-overlooked tax incentives.

First things first—what is the difference between a tax credit and a tax deduction?

While a deduction reduces taxable income, a tax credit is a dollar for dollar savings in tax dollars. For example, a $50,000 deduction saves roughly $15,000 in federal income tax while a $50,000 credit reduces taxes by $50,000!

The Research and Development (R&D) credit is a wage-based credit for a new or improved business component whereby you create or improve a process or product. For contractors, processes are the biggest component of what can be used for this credit.

The R&D credit is the most overlooked credit because the name “Research and Development” makes most contractors see it as only having to be scientific in nature. That is false. Research and development does not consist of people in lab coats creating formulas.

What qualifies as a component of the R&D credit?

Examples of Qualifying Activity in the construction Industry:

To help determine if you have the right pieces to qualify, it is helpful to run this four-part test:

Note: The uncertain implementation of something does NOT require it to be a success.

The PATH Act of 2016 made the R&D credit a permanent incentive. Contractors with under $50,000,000 of Average Annual Gross Receipts can offset their AMT Tax.

For more information on how you can utilize this underutilized credit, please contact Joseph Molloy, Construction Tax Director of Grassi & Co. at JMolloy@grassicpas.com. [/vc_column_text][/vc_column][/vc_row][vc_row type=”full_width_section” bg_position=”left top”][vc_column width=”1/1″][minti_divider margin=”0″][/vc_column][/vc_row]

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