Manufacturers: Don’t Overlook Important Tax Credits
In the manufacturing industry, there are many available tax credits for businesses: Research and Development Credit, Jobs Tax Credit, Work Opportunity Tax Credit, Fuel Tax Credit, and numerous state tax credits for investing in equipment/employee training, etc. However, many manufacturers are not taking advantage of the benefit they present.
Below, we’ve highlighted two tax credit opportunities where we notice many manufacturers have ‘left money on the table,’ so to speak. We attribute these oversights to old assumptions and misunderstood parameters and that can easily be rectified with the correct applications.
1: R&D Tax Credit: Easier to Attain than Many Assume
One of the biggest tax credits that manufacturers overlook or do not maximize is the Research and Development (R&D) tax credit. Yet, it is by far the most valuable credit that can be leveraged by manufacturing companies.
As the credit has been around for 40 years, I’ve talked to several individuals in management that believe the credit is not worth their time. There seems to be two consistent reasons as to why they are not taking advantage of the R&D credit today.
The best part about the R&D credit is that most states also offer this credit, meaning that there is the opportunity to get a federal and state tax credit to offset a company’s or individuals (if pass-through) tax liabilities.
2: WOTC: Classifications Often Overlooked Due to Misunderstanding
Another underutilized tax credit is the Work Opportunity Tax Credit (WOTC). With 10 targeted classifications that an employee can fall under to be eligible to receive the credit, employers are often overlooking hiring from specified ‘Target Groups’ and missing out on benefits. This classification is easily overlooked, but easy to obtain: Hiring people from an Empowerment zone, Enterprise community, or Renewal community where the company is located.
Have you maxed out your tax benefits? Contact K·Coe’s manufacturing-specialized tax advisors with questions on tax credits.