We continue our series on proper tax planning this month by switching over and looking into the 179D deduction and R&D tax credits for business available under the current tax regulations.

Consumers are concerned more and more about the environment and are being selective with their purchases to prove it. Businesses that have realized this can use the Section 179D regulations to their advantage.

By taking steps to improve their systems or to make their products more energy efficient or green (and thereby enticing the consumer to buy their products), they are eligible to earn tax credit under Section 179D.

The Section 179D regulations offer a great opportunity for many companies that are providing energy efficient properties or improvements to properties. Although the calculations and requirements to obtain the deduction are not simple, they can amount to significant dollars, about $15,000 on the average commercial project.

The R&D credit is another great opportunity for many companies. Most companies would ask “How can we get an R&D credit? We don’t do research and development”, but under the regulations many industries qualify for this credit. You don’t need to be a lab or research facility to qualify for the credit; if you consistently work on new products, new processes, or ways to better the current product or systems you use, you qualify for the credit. Companies that track these added costs separately from the normal overhead, can reap the benefits of the tax law. Although there is a significant amount of documentation that is needed, the savings can be significant.

Most states also offer similar R&D credits to companies for improving their industry.

The IRS and state are not giving these tax savings away. You have to ask for them, and you have to have the proper documentation to get them, but it’s possible with proper planning.


Article by: Brad Voght, C.P.A.