Construction and manufacturing business owners should know if they’re eligible for some major tax breaks for their industries. Don’t be so focused on the day-to-day operations of your organization that you don’t realize how much you may be able to save with a more strategic approach to their tax planning.

Fuel Tax Credits

Generally, businesses in manufacturing, construction, and even farming can claim the tax credit so long as they are using fuel specifically in off-highway vehicles. This credit allows eligible entities to claim a credit that ranges anywhere from 50 cents to one dollar per gallon of fuel (including alternative fuel) purchased, which can help to offset operating expenses for businesses in these industries. Credits are also available for alternative fuel sources, including propane, biodiesel and liquefied hydrogen. 

State Tax Incentives

Contractors and those in the manufacturing business are also encouraged to check for potential tax breaks and other incentives in the states where they operate, as many states offer special credits and deductions for businesses in these industries. Oftentimes, these state-specific credits are overlooked by contractors and business owners, but they could make a huge difference in taxes owed when it comes time to file.

The best way to determine which tax breaks your business may be eligible for is to check with your state’s department of revenue. Some examples of credits or deductions you may be able to claim include those for innovation/research, PPE purchases, and even incentives for creating new jobs within the state. Many states also offer industry-specific credits and grants designed to promote business expansion and workforce development. 

R&D Tax Credits

Research and development is another area that is commonly overlooked when it comes to business taxes. The IRS offers a Credit for Increasing Research Activities for contractors and manufacturers that develop, design or improve upon existing products/services.

There are many ways to qualify for R&D credits, but it is important to keep in mind that businesses must be able to claim the research being performed is for a permitted purpose, is technological in nature, and includes a detailed process of experimentation. R&D credits can be claimed against your income tax or even carried forward into the following year, in some cases. 

Employment Tax Breaks

In addition to research and development of tax incentives, contractors and manufacturers may also be able to claim special employment tax breaks. The Work Opportunity Tax Credit, for example, allows businesses to claim credit for hiring employees who typically face barriers to employment, such as ex-felons and military veterans. Meanwhile, the Empowerment Zone Employment credit is offered to businesses that pay wages to employees living in designated empowerment zones. 

Corrigan Krause Can Help Contractors and Manufacturers 

From fuel tax credits to special state-based incentives for contractors and manufacturers, there’s a lot to keep in mind as you run your business. The Construction Services and Manufacturing Services teams at Corrigan Krause are here to help you navigate and take advantage of tax opportunities your business is eligible for. Click here to learn more about becoming a client.