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Concluding our series of exploring specialized tax incentives, we’re talking about property tax mitigation. Most companies and businesses consider property taxes to be a fixed cost. Not only that, property taxes are often the single largest recurring cost for commercial property owners. And most business owners are being overcharged on such taxes. However, a review of personal property tax assessments can result in potentially lowering property tax bills, resulting in increased profitability.

What is property tax mitigation?

Property tax mitigation is an in-depth analysis conducted by industry professionals to reduce the amount of real estate and/or personal property taxes. Experts will assess and determine the valuation of a property to find opportunities for refunds and reduction in taxes. A property tax review can result in savings of 10-25 percent or more of the total real or personal property taxes paid.

What are the benefits?

Immediately, there would be a reduction of taxes owed and potential refunds on the excess of prior paid taxes. The years that follow could see a reduced tax burden, thus produce an increased cash flow for your business along with no fees on future filings.

How do I know if I qualify?

Commercial buildings with property taxes that exceed $50,000 per year qualify. Businesses within a wide range of industries often undergo property tax mitigation, such as manufacturing companies, auto dealerships, restaurants and retailers.

Protect your bottom line and contact us to find out if a property tax mitigation is the right strategy for your business. We’ll explore your options and see if your property qualifies. Contact Ray Hodges today to set up an appointment!

Also learn more about other specialized tax incentives:

• Cost segregation studies
• Research and development

In this installment of our non-traditional tax incentive series, we discuss the financial benefits of conducting research and development. Initially a temporary program in the 1980s, this tax credit was created to incentivize and reward companies that invest in research. The Protecting Americans from Tax Hikes Act of 2015 was officially passed into law as a permanent federal tax program.

Research and development does not exclusively apply to medical organizations conducting experiments to cure cancer or to an engineer inventing a driverless car. The government offers R&D credit to encourage businesses of all types to engage in innovation and change, not necessarily invent something revolutionary.

Several business industries can participate in R&D: manufacturing, engineering design, software, chemical and pharmaceutical. Examples of R&D efforts that the IRS qualifies are streamlining company processes, programming new software, developing cost-efficient solutions, and integrating new machinery or technology into existing assets.

How does it work?

The federal R&D tax credit, also known as the Research and Experimentation tax credit, was established to encourage private businesses to invest in innovation.

There are four criteria that R&D activities must achieve in order to qualify for tax credit:

1. They address a technological hurdle.
2. An applied or hard science, such as engineering, biology or computer science, was conducted.
3. The project introduces a new or improved business component, such as equipment, software or technique.
4. They must prove experimentation was conducted through a process of testing and evaluation.

The results of the research do not necessarily have to be successful. Companies merely have to demonstrate the efforts they made toward the study.

Is my company big enough to qualify?

While it’s normal for higher revenue corporations to conduct R&D because of their access to greater resources, small businesses and startups can also qualify for the R&D tax credit. The passing of the PATH Act encouraged small businesses to participate in R&D by allowing them to take the tax credit against their alternative minimum tax. Additionally, startup businesses with no federal tax liability and gross receipts of less than $5 million can now take the R&D tax credit against their payroll taxes, even if they pay no income tax.

What are the benefits?

Companies that claim R&D benefits can save $20,000 to $40,000 per year for every $1 million in annual payroll. One advantage is that companies can receive R&D benefits, with interest, for activities conducted up to three years prior, in addition to the current tax year.

If you think your business is eligible for research and development tax benefits, comment below or contact Ray Hodges today to see if you can reduce your taxes. Also, read our previous post about another non-traditional tax incentive: cost segregation studies. It’s your money, until you give it away!  

Tax Season is always a burden. For small business owners, it may even be worse. Many entrepreneurs are caught off guard when they find themselves owing unexpected amounts money to the IRS and then struggle to find the funds to pay them off. Little do they know there are countless incentives available in the IRS code that can relieve this financial burden, many of which your CPA may even be unaware of.

The IRS does a great job keeping this information under the radar. This article is the first of a three-part series that explores different ways you can stop owing additional money to the government and possibly get cash put back into YOUR account.

The first incentives we will discuss are cost segregation studies. This federal program was designed for business owners who own commercial properties or those who have made significant improvements to the space they’re leasing. Undergoing a cost segregation study allows business owners to reclassify certain components of a property from commercial to personal. Reclassification can shorten its depreciation time for taxation purposes, thus potentially lowering any business taxes owed. This study reviews exterior site improvements like the landscaping and the parking lot and interior upgrades such as light fixtures, special plumbing, flooring, millwork, electrical, cabinetry and furnishings.

Facilities that often undergo this type of engineering-based review include hotels, apartment complexes, restaurants, office complexes, manufacturing facilities, funeral homes, golf courses, large retailers, medical clinics and hospitals. Due to recent tax reform efforts, this practice has become more accessible for small and midsize property owners, providing them an opportunity to reduce federal taxes. In some cases, businesses have even received refunds as a result of this analysis.

How do you know if your facility is eligible? There are some criteria that the facility and its owner or lessee must meet:

• The facility was purchased or built within the last 20 years and values more than $500,000.
• Renovations and improvements completed in the last 20 years must meet or exceed $250,000.
• The taxpayer must have paid federal taxes in the last three years.

Ninety percent of all commercial properties are eligible for this program. To find out if your business qualifies, complete this quick three-minute survey. Ray Hodges can then conduct an assessment and provide an estimate on your facility.

Stay tuned for more specialized tax incentives to alleviate tax obligations. It’s your money, until you give it away!

What is the Distribution Solution?

Most people who diligently save for retirement in a 401(k) or other qualified retirement plan have no idea that they will lose nearly 40 percent of their savings to income taxes when they begin taking distributions. In addition to income taxes, those who fail to take their Required Minimum Distributions at age 70 ½ will be charged up to a 50 percent penalty.

Using a little known strategy called The Distribution Solution, business owners are one of the few groups that can escape these exorbitant income taxes and RMD penalties.

How does the Distribution Solution work?

The Distribution Solution is a tax-favored program for business owners who have successfully saved for retirement using a 401(k) or another qualified retirement plan. The Distribution Solution allows business owners to retain a larger portion of their hard-earned money by repositioning retirement assets into a flexible and permanent life insurance policy, thus allowing potential tax-advantaged distributions.

What’s the benefit of the Distribution Solution?

By transferring your savings from a qualified retirement account to a life insurance policy, your assets are subject to significantly less taxes upon withdrawal each month. You can avoid the stress of figuring out how to pay your taxes each year and actually enjoy your retirement savings that you so diligently accrued.

Also, when your assets are passed on to your beneficiaries, they will receive them tax-free.

How do I know if this strategy is right for me and my family?

To find out whether The Distribution Solution is a good fit for your retirement needs, contact us today and we’ll walk you through the process! And check out this video for more information.

It’s your money…until you give it away.

How do you define “financial freedom”? Would you agree that financial freedom means never worrying about whether you could pay your monthly bills because the income you receive per month is more than your monthly expenses? And what if you could receive that income for the rest of your life without lifting a finger to receive it?

Statistics show the stock market crashes every 7 – 10 years, and when it occurs, the stock market declines by an average 41%  https://finmason.com/2015/05/19/how-often-does-the-stock-market-crash/. This means we’re due for another crash since the last stock market crash was in 2008.