Having served the built industry in excellence for the past calendar year, it only seems fitting that you find a suitable way to reward your efforts. While we’ll leave the holiday party planning to your capable staff, we’ll contribute to the celebration by offering some suggestions for minimizing your company’s tax liability for 2014.
Estimate Your Year-End P&L
Many architecture and engineering firms set a goal of paying as little federal or state taxes as possible as a corporate entity. That objective calls for rendering an accurate forecast of the firm’s profit and loss statement well in advance of year-end. With that information in hand, the principals have the option to increase cash outflows to drive reported profits to the desired target taxable income. These outflows could include contributions to defined benefit plans and bonus payments. If cash is tight, another tax planning opportunity might be to issue stock bonuses instead of cash bonuses.
Be Alert to Section 179 Changes
Section 179 deductions for property acquisitions could have a significant impact on this year’s planning horizon. In prior years, the IRS allowed businesses to deduct up to $500,000 of all purchases of property and equipment. For 2014, this limit has been reduced to $25,000. Moreover, if the practice purchases are more than $225,000 of eligible property in one year, no Section 179 deduction may be claimed.
If you have become acclimated to using the liberal write-offs, you will need to adjust your expectations for 2014 and be prepared to address the increase in reported profits. We’ll keep you informed should Congress opt to extend the higher limits through 2014.
Credits and Deductions
Taxpayers with certain research expenditures may qualify for the often overlooked research and experimentation tax credit. There is also an opportunity for a 179D tax deduction for qualifying energy efficiency improvements on commercial buildings.
If you take advantage of these tax savings strategies, they can assist you in managing your income bracket for 2014. These techniques are great options for the short term, but we also work with our clients to evaluate their financial outlook, not only for tomorrow, but for 10, 20 and 30 years from now.