As companies are looking ahead at the future of their business, several are considering expanding to add additional resources, keep up with increasing demand or expand into other markets. If expansion is part of the forecast, discuss with your tax advisors now so you don’t miss out on potential tax savings strategies. Here are a few examples:
- Research & Development Tax Credit—if your expansion involves research expenses for a new product line or enhancements to current products, you may be eligible for a federal tax credit.
- Cost Segregation Study—if your expansion involves new construction or a new building, a cost seg study will break down the building assets to accelerate depreciation deductions.
- IC-DISC—if your expansion involves growth in foreign exports, you may want to consider creating an IC-DISC. With the creation of this entity, a U.S.-based company can convert its export sales income, which is taxable at ordinary income rates, into qualified dividends, taxed at capital gains rates. This creates an effective tax savings of 15% – 18% each year.
- Missouri State Credits—many state credits go unused every year. If your expansion involves hiring new employees, you may qualify for the Missouri Works Program. These incentives can add up to several thousand dollars per new job. The application for this credit must begin before the new hiring starts.
If you’re considering expansion, please contact an Anders advisor to make sure you maximize your tax benefits.
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