What Tax Deductions and Credits Are Available for My Construction Company?

As a construction company owner, you have the opportunity to take advantage of various tax deductions and credits that can help reduce your taxable income and improve your bottom line. These incentives are designed to encourage specific business activities and investments, so it’s important to be aware of the opportunities available to your business. Here’s a breakdown of some key tax deductions and credits you should consider:

1) Qualified Production Activities Deduction

Don’t miss out on the Qualified Production Activities Deduction available to construction companies equal to 9% of qualified income. The deduction is taken on page 1 of your individual return for partnership and S corporation owners and on the front page of the 1120 for corporations.  Qualifying activities include construction and substantial renovation of real property, including residential and commercial buildings and infrastructure such as roads, power lines, water systems, and communications facilities by a taxpayer engaged in the active conduct of a construction trade or business. Be careful with this allocation because not all receipts qualify. Domestic production gross receipts do not include gross receipts derived from the lease, rental, license, sale, exchange or other disposition of land.

2) Research and Development

Research and development is not just for scientists. You may be surprised to hear that some of your activities can qualify for a research and development credit. Engineers, designers, and machinist often spend time improving the constructions process. Exploring new methods or constructions techniques, improving construction equipment, designing LLED/green initiatives and performing request for information process (RFI’s) are all activities that would make you eligible for this credit. If you haven’t considered this incentive, we can help figure out which part of your business activities qualifies.

3) Work Opportunity Credit

Reconsider who you are going to hire. The Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to employers for hiring individuals from certain target groups who have consistently faced significant barriers to employment. This credit takes some planning so it should be built into your hiring process. The employer must obtain certification that an individual is a member of a targeted group before the employer may claim a credit. Qualified veterans, qualified long-term unemployment recipients, or SNAP (Food Stamp) recipients and are some of the groups that qualify for a credit that ranges from $1,200 to $9,600 depending on the employee hired. Give us a call when you are ready to hire new employees so we can help you take advantage of this credit opportunity.