BUSINESS TAX STRATEGIES
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Some Important Things to Know to Take Advantage of:
R&D Tax Credit
You don’t have to be in aerospace technology development or new software development to take advantage of the Research and Development Tax Credit (R&D). A common misconception is that the R&D Tax Credit only applies to traditional manufacturers involved in new product development or high tech businesses. While these industry segments qualify, so do other industries who engage in:
• Process improvements and development
• Improvements in function, reliability and quality to existing products
• Research and specification design
• Developing and/or improving new products, processes, formulas, software, techniques
• Developing prototypes or models
• Designing dies, molds, tools and jigs
• Applying for patents
• Testing new concepts, new technology, or sourcing for new raw materials
• Improving existing or building new facilities
• Employing consultants/contractors to perform these activities
Companies that perform any of the above activities may significantly increase their cash flow by taking full advantage of the R&D Tax Credit.
Companies that produce between 50 and 60 percent of their products in the United States would receive an additional 2 percent on their R&D tax credit. Those that produce between 60 and 70 percent in the United States would receive an additional 4 percent; those that produce between 70 percent and 80 percent would receive an additional 6 percent; between 80 percent and 90 percent would receive 8 percent; and those that produce more that 90 percent in the United States would receive an additional 10 percent.
Inventory Tax Planning
Companies with a minimum of $2M of inventory may benefit using the IPIC LIFO method by bringing a cash infusion to the company. Examples of inventory classifications that could benefit include: chemicals and allied products (paint, pharmaceuticals, resins), rubber and plastic products, building materials and hardware, nonmetallic mineral products (concrete, asphalt), machinery and equipment, furniture, and certain metal products.
Cost Segregation Studies
Companies who have acquired a building and/or improved an existing facility in the past 10-15 years may benefit through the Cost Segregation tax-saving strategy. This strategy accelerates the manner in which the investment costs of the facility are recovered.
Energy-Efficient Commercial Building Tax Deduction
Companies making energy conservation and efficiency improvements to their buildings or constructing new energy-efficient buildings are eligible for an immediate deduction of expenses attributable to qualified energy-saving improvements to commercial buildings.