4 Ways Architects and Contractors Can Save Money in a Down Economy
Per the Center for American Progress, “Jobs are down 38 percent since 2006 in residential construction alone. Further, more than 90 percent of contractors in the construction industry are small businesses – another hard-hit segment of the economy”. What is the first thing we do when revenues are down? We cut costs! The following are some tax planning tips to help you save money:
- Did you choose the right structure? You can conduct your construction business as a sole proprietorship, a partnership, a regular corporation or an S Corporation. The form that you choose will have a direct impact on the amount of tax you pay.
- Maximize Net Operating Losses. A Net Operating Loss (NOL) from one year may be used to reduce taxable income from another year. It can be carried back to a prior year resulting in a tax refund. If the NOL was not completely used up in the previous two years prior to incurring the NOL then the remainder of the loss can be carry forward and applied against taxable income for up to 20 years.
- Utilize the bonus depreciation. On February 1st, President Obama issued his 2011 budget and that included extending bonus first-year depreciation to apply to property placed in service in 2010. What does that exactly mean? You can write-off 50% of the purchase price of any equipment placed in service in 2010.
- Hire a new employee. This seems like an impossible feat when “jobs are down 38 percent since 2006” but as the saying always goes – “you need to spend money to make money” and why not do it in the year the Government is giving a tax credit up to $5,000 for new workers added in 2010, and for new employees who not employed for more than 40 hours during a 60-day period ending on the start date, the wages are exempt from the 6.2 percent employer portion of Social Security tax.
To identify and implement the tax strategies best suited to your situation, please contact us.