Bonus Depreciation and Cost Segregation

Unlock More Capital Than Ever Before

The Tax Cuts and Jobs Act (TCJA), signed into law by President Trump in December of 2017, has had an effect on a variety of taxpayers, and has made widespread changes to the Internal Revenue Service. One of the main groups of people that benefit from TCJA are commercial real estate owners and investors, who are now able to qualify for significant tax benefits including bonus depreciation and cost segregation studies.

Benefiting from The Tax Cuts and Jobs Act

Increase Bonus Depreciation

One of the main benefits of the TCJA is the increase of bonus depreciation from 50% to 100%. Prior to the new bill, bonus depreciation only applied to newly constructed or original property. Real estate owners and investors are now able to benefit from bonus depreciation. Used property that has been acquired after September 27th, 2017, and properties under $1 million can also benefit from bonus depreciation. A cost segregation study will establish what costs qualify for 100% bonus depreciation.

Expansion of Qualifying Properties

Maximize Cash flow With Additional Property write-offs

The TCJA has also expanded the list of qualifying properties to include roofs, HVAC systems, fire protection, alarm systems, and security systems. The allowable expense of these properties has been increased from $500,000 to $1,000,000, and the phase-out deduction has increased to $2.5M. Properties now include personal property that has been acquired for rental properties, furniture, and appliances.

The TCJA has opened the door for any owner or investor of a new or used property to maximize savings. A cost segregation study will identify all qualifying assets, and determine the ability to use the new bonus depreciation provisions.

100% Immediate Bonus on First Year Deductions

Immediate First Year Deduction

Bonus depreciation allows a business to take an immediate first-year deduction on the purchase of an eligible business property. Under the new law, bonus depreciation has increased from 50% to 100% for assets with a modified accelerated cost recovery system life of 20 years or less. Our team of tax experts and engineers are able to immediately write-off assets depreciated under 20 years, thus increasing cash flow.

Qualifying for R&D

A lot of companies qualify without realizing they do.

Research and Development Tax Credits are available to any corporation, business, or startup that engages in research activities to develop or improve their products, processes, or software. The main qualifier to benefit from R&D credit is to pass the 4-Part Test. Read more

Reaping The Benefits

An incentive for more companies than you thought.

The Research and Development Tax Credit was created as an incentive for companies to be creative while performing research activities to develop or improve their products, processes, or software. We are thrilled to now offer startups assistance with capitalizing on R&D Tax credits by offsetting it against their payroll taxes.

What This Means

Don’t get shutout anymore.

Startup companies have been shutout in the past from claiming R&D simply because they lacked tax income liabilities. These blossoming companies are now able to take advantage of this money-saving credit due to a 2015 provision, which broadened the scope of industries that are able to benefit.

If your startup is making less than $5 Million in annual gross and performing qualifying research, we can work with you to offset as much as $250,000 on your payroll tax liabilities to compensate your business for the money spent performing the research.

Saving Money with R&D

We understand the importance of saving money, especially in the first few years of owning a new company. A common concern for startups is how they can quantify spending money on developing or improving their product, before they even start generating a profit. That’s where we step in to reclaim costs spent on Research and Development.

We offer our assistance before, during, and after the qualifying research activities are completed. We will complete a full assessment to ensure that you have the proper documentation, and have taken all necessary steps to pass the R&D 4-Part test.

What is the 4-part Test?

A simple solution to a complicated problem.

The 4-Part test, created by the IRS, takes an extensive look at your research and development processes. The 4-part test is the main qualifier for any company to benefit from the R&D Tax Credit. For an in depth analysis of the 4-part test and it’s qualifications, you can read our article.

 

Tax Experts You Can Rely On

Our in-house engineers and tax experts take pride is setting up our clients for success when they work with us to take advantage of our numerous tax saving services. We don’t take our client’s trust lightly, and understand that they count on us to acquire the most amount of money and savings we can, while abiding by the rules and regulations put into place by the IRS. We’re with our clients every step of the way, even after their taxes have been submitted.

No Cost, No Stress

We are proud to say that when you work with us, you are guaranteed a marginally low risk of ever being audited. We do understand that there may come a time when a tax credit or deduction claim is subjected to examination by the IRS or State Tax Authorities. We are the tax experts you can trust for a reason and we are always prepared to provide any documentation needed to bring you through to the other side of an audit without incident.

Our audit support will always be free because we care about our clients. Let us be your trusted advisors.

 Changing Our Name To Better Serve You

With the growing number of tax-saving services we offer our clients, we have moved beyond the name National Cost, and are excited to introduce our new company, National Tax Group. The main goal is for our clients to know that we are still the hard-working tax services team with the mission of offering top-tier tax solutions to CPAs and businesses, but are now able to assist our clients in more ways than ever by capitalizing on two new services – R&D Tax Credits and 45L Tax Credits. Read more

The R&D Tax Credit

There are a lot of ways that businesses can benefit from research and development (R&D).  Recently, an R&D tax credit was established by Congress, taking shape after a decision in the early 1980s to help businesses in the United States remain viable in the world marketplace. The laws on credits were made permanent in January 2016, geared towards existing and new businesses alike. Small, medium and large businesses have the opportunity to pursue R&D tax credits and get reimbursed for some of their developmental expenses.

The business community can use R&D taxes to establish, refine, and improve their business model without it coming entirely out of pocket.

The credit could help your company acquire other incentives while innovating and staying competitive in the market at large.

The businesses particularly affected from this decision are the manufacturing, software, technology and architectural, as well as engineering industries.  Many enterprises have acquired billions of dollars from federal and state tax credits to cover the research and development expenditures that they undergo on a regular basis. The businesses that use R&D strategies can receive up to 10-15% or more ROI to cover wages, contractor and supplies cost.

However, many companies that are eligible have not even tried to claim these funds.

How To Improve Your Business With R & D Tax Credits

Consumers are attracted to products and services that are innovative and on the cutting edge. Research and development are great ways for businesses to create these kinds of products to fit the expectations of customers. Whether your organization focuses on science or technology, R&D can make a big difference in getting the best new features and staying ahead of the competition. With recent tax credit incentives, businesses that utilize research and development can benefit significantly. Companies in the United States were anticipated to spend $465 billion on research and development in 2014. These R&D investments were about 2.5% of U.S GDP.

Many firms continue to invest in research and development because they want to expand by creating the new product– that’s why this tax credit comes in handy.

R&D Credit Reforms by Congress

Companies in the US continue to invest in R&D to maximize profits and improve their offerings. Congress has made it easier for developing businesses to succeed in this environment. One of the most important proposal ideas is a bipartisan bill which will motivate companies to continue research and development by incentivizing the process. This bill will enable many companies to manufacture new products in the USA. It is usually designated for companies to conduct research and development on U.S in areas such as science and technology.

The bipartisan bill will support allocation of R&D funds and increase the actual production of novel products and services too. The R&D tax credit reforms support both basic and applied sciences which are integral parts of the manufacturing process and production line.
The Senators bill offers a 25% increase on R&D credit taxes for companies manufacturing products in the U.S. This will improve research and production of new products throughout the country too. The R&D tax credit reformation facilitated by Congress will help both small and medium companies to enter competitive spaces while improving available services to consumers.

Another one of the proposal aims is to increase Alternative Simplified options to 20% from 14%. This is similar to regular R&D tax credits and the bill will support new companies by allowing credit which is equivalent to 10% of the taxpayers qualified research cost per annum. The amendment reforms 280C of the tax code and will affect small and mediums investor who are looking forward to obtaining R&D tax credits for the first time. The lawmakers proposed to reduce expenses involved in research and development to allow taxpayers to elect to apply for a reduced R&D tax credit on both original tax return.

The amendment will bring changes and reformation that strengthens both small and medium business no matter what face they are in. The PATH Act also removes all problems that affect small and medium companies that take on R&D tax credit. Many investors have started accepting the R&D tax credit especially among those who own and operate small scale enterprises.

Benefits of the Tax Cut on R&D

The 21% corporate tax rate cut is set to improve the production capacity of the economy on a whole. It will also help manufacturers in the US to become more competitive in production. This decision will ultimately encourage suppliers of capital equipment to write off materials used throughout the year. The cost of equipment increased to 11.4% over the years making this almost necessary to maintain profit margins.

The cut on the tax R&D is seen to be a generous tax reform package from the standpoint of U.S manufacturing organizations. This is because deductions focus on investing in technology and capacity building to produce unique products that are attractive to consumers across the globe. Automotive investors will take advantage of the reformed policies on R&D taxes to invest more than in previous years. Manufacturers admit that the changes in taxes make capital expenditure less costly for automation equipment at large. The decrease in corporate tax rates is also a big boost for the manufacturing industry in the U.S. Ultimately, the transformation in tax amendments will be a great asset to capital equipment producers for years to come.

How Business Benefit from R&D Tax Credit

This tax credit improves and strengthens the market value of both business operations and services. Money saved can be reinvested into a new R&D project which is the ultimate goal. The new R&D can enhance company growth and cash flow for future operations. Funds generated from the state tax credit and federal ones alike can be carried forward for up to two decades, adding to the advantages received by small businesses. The tax credit is offered to allow company design, development, processes, and invention of new products– something that many startups may struggle with on their own.

The IRS gives credits to help businesses stay competitive in the United States. There’s no reason why industries in the US should fail to experience growth and change because the R&D tax credit is available to all entrepreneurs.

Businesses just like yours could get over $10 billion per year from the IRS regardless of the size and type of the company. Nearly all states give the R&D tax benefits to supplement all business. These incentives are meant to build the capacity of the industry to consistently manufactures goods and services. Without the help of credit tax on R&D in the US, many enterprises are likely dying at conception. Start-up business operating under $5million can qualify over $250,000 against payroll liability. This amount can help start-up businesses to improve its research and invention.

Conclusion

Despite the fact that, the R&D credit tax is available, many companies don’t apply for it. Small and start-up business should take advantage of R&D credit tax to improve production and growth with no out of pocket costs.

Find out how your business can succeed with tax credits by contacting us!

Republican tax cuts have arrived to businesses in recent months, making finances just a little bit easier. Changes to tax codes give a lot more companies the opportunity to immediately subtract capital expenditures from their taxable income.

This can be used for:

• Building renovations.
• The purchase of equipment.
• Other Research or Design expenses.

The change has gotten many industry analysts expecting:

• Great returns on investments with regards to automation systems.
• New industrial materials which will help companies.
• And the possibility for expected wage increases.

What are R&D Tax credits?

R&D Tax Credits are incentives given to businesses by the federal government. The purpose is to give organizations an edge to become more globally competitive in sectors of both science and technology. R&D operates much like a rewards system for companies that are involved in innovation.

Research and development also plays a crucial role in the promotion of the innovation sector at large. Simply put, research is an investment in technology which is used to improve services, products and processes. The system works by helping SMEs (small and medium-sized enterprises) with tax breaks. It also reduces the amount of tax liability on profits which translates into lower corporate taxes.

For startups, it may be hard to calculate research and development costs. For instance, businesses that use the accrual method tend to look at R&D as an expense, while a company contracted to carry out R&D might treat it as an operational cost. Does R&D exclusively apply to companies involved in innovation and development? Not necessarily. Companies that invest in growth and research can treat such costs as expenses for related activities that contribute to their long term advancement.

Why should companies care about R&D tax relief?

Most companies that could benefit from R&D tax credits don’t always act on it because they don’t know how to claim such benefits. Sometimes activities and programs that qualify for research and development go unrewarded because of  the companies unfamiliarity with policies and regulations. The good thing is that most SMEs can now benefit from the systematic advantage of R&D tax credits.

The billions that go unclaimed every year due to lack of information can help businesses achieve new success in a lot of different areas. One of the biggest advantages is in the form of payroll taxes leading to refund checks from the IRS. Simply put, your projects will qualify for tax relief if they are creating innovation in the field of science and technology and uncertain
outcomes. All projects that qualify will contribute to specified fields in the form of new services, processes or products.

Important questions businesses should ask themselves to learn if they qualify for substantial tax benefits:

• Has your business developed any new software, product or processes?
• Has your company upgraded any current product, software or processes?
• Has your company ever tried to improve current processes, products or services?

There are other qualifications apart from the above that a company must meet to be considered for the R&D tax credit.

Here is a list of what does NOT qualify for R&D:

• Studies or surveys.
• Research funded by an individual or a government entity.
• Research carried out outside of the United States.
• Research in arts, social sciences, and humanities.

Innovation continues to play a key role in business competitiveness. Those who know how to take advantage of R&D can use it to increase their cash flow and grow their profit margins. There are a few defining parameters about qualified research objectives that will help businesses grow.

Qualified research is the attempt to develop a new business aspect or improve existing aspects as it relates to:

• Functionality.
• Performance.
• Quality.
• Reliability.

A business aspect can also take any of the following shapes or forms:

• A process.
• product.
• service.
• an intervention.
• a software.

To qualify, a business aspect must be intended for lease, sale or license to be used by the taxpayer in the course of their businesses. On the other hand, qualified research can also be regarded as a part of an experiment. Having a business aspect or component alone is not enough.

There are three other important requirments to be met:

1. All activities involved in developing a new product or service must contain elements of experimentation.
2. The method of a business component must be uncertain at the beginning of the experimentation process.
3. The process must heavily depend on technological developments.

What kinds of businesses are eligible for R&D tax relief?

To qualify for R&D tax relief, a business must do a project that shows work geared towards innovation and advancement in areas of science and technology. Companies can use any of these three schemes to claim R&D depending on the size of their companies:

• SME scheme.
• Large company scheme.
• R&D expenditure credits came into effect from April 2016.

All qualifying projects have to show how they can improve existing products, processes or services. Their innovation must revolve around any aspect of technological or scientific uncertainty. The project must also be related to trade carried out by your business or one that you intended to be carried out due to R&D.

For instance, an eligible project can be a business that builds IT software to run a new management system. Such a company or business can make R&D claims based on the revenue expenditure, materials used, utilities employed, and wages for those working on the project and the software required. This cost would be deducted from the accounted profits in such mentioned areas. Therefore, they would be liable for reduced corporation taxes on the
remaining amount.

This would be subtracted from their accounted earnings in multiple specific areas, and they would only be liable for Corporation Tax on the remaining amount.

How to make a claim

It is in your best interest to get professional advice before claiming HMRC. National Tax Group will help you to explore all opportunities available so that you can get a good deal. We can help look for R&D tax solutions for you based on substantial experience in this sector. The first task is to know which scheme to claim your R&D tax claims; SME or large company. SMEs can also
make claims under large corporation’s plans under exceptional circumstances.

National Tax Group can help give a detailed technical description to show why your projects qualify for R&D tax credits. The report will state that you are creating innovation in the field of science and technology under a climate of technological and scientific uncertainty. An HMRC inspector will
review your claims to ascertain if indeed you qualify for a tax credit. Get ahead in your business and the industry at large with R&D tax credits!