The construction industry is one of the most taxed industries in the US. Construction companies with the occasional cash flow challenge will appreciate the benefits they’ll enjoy under the recent law changes. Recent changes to the tax code have made it possible for construction companies to take advantage of tax savings in multiple areas.

Overview of tax breaks

The corporate rate for businesses was initially 35, but that has been lowered to 21 percent as a result of the recent changes in tax code. In reducing the pass-through rate, owners of pass-through businesses will now only have to pay 20 percent. Business owners in the construction industry will be able to add their business profits to their tax returns. Private Activity Bonds were protected as tax-exempt, which means that infrastructure projects will be consistently funded.

The impact of different customer companies

Having the tax reduced to 20 percent gives construction business owners access to cash. Corporate tax rates lowered meets a cash flow need for construction business owners. Improvements in cash flow affect day-to-day operations for businesses.

Companies needs equipment expensing to expand their production capabilities. Construction companies will now be able to expense more of their construction equipment needs under the Section 179 equipment expension changes. The amount increased from $500,000 to $1 million. The demands that come with depreciation in accounting practices where construction equipment is concerned to have been reduced under the new law. Construction companies can write off most of the costs for acquiring qualifying assets. They can be either new or used and can be bought using the bonus depreciation option.

The new law also provides a refund of the tax credit for the alternative minimum tax. Now construction company owners can get a refund of 50 percent from 2017 and 2022 for the excess of that credit for that particular tax period.

The alternative tax lowered means that pass-through businesses will only be taxed at the 80 percent rate. Construction companies operating as a pass-through business will benefit if structured as an LLC or S-Corp.

Construction companies historically have been one of the companies that have been taxed at the highest rates, which inhibits growth and expansion opportunities for cash-strapped businesses. Construction companies now enjoy a lower corporate tax rate. Changes to the alternative minimum tax rate and expensing modifications lessen the tax burden for companies. A company can save and invest with these measures in place. Consult a CPA firm to make sure that you can take advantage of these opportunities.



J Donohoe Associates

Seeking Alpha