Taxes are a significant expense for any business, but they also present opportunities for savings. With strategic planning and a keen understanding of tax laws and regulations, businesses can reduce their tax liability and retain more of their hard-earned revenue. This article will explore a variety of tax-saving strategies for businesses, with a particular focus on the unique opportunities available to roofing companies.
General Business Tax Savings Strategies
- Claim All Available Deductions: Businesses can claim deductions for a variety of expenses incurred in their operations, including salaries and wages, rent, utilities, office supplies, and the cost of goods sold. It’s essential to track these expenses carefully and claim every available deduction to reduce taxable income.
- Depreciation: Depreciation allows businesses to spread the cost of a long-term asset over its useful life, reducing taxable income each year. The IRS provides guidelines on how different types of assets should be depreciated.
- Tax Credits: Unlike deductions, which reduce taxable income, tax credits directly reduce the tax owed. Numerous tax credits are available to businesses, including the Work Opportunity Tax Credit for hiring individuals from certain target groups and the Research & Experimentation Tax Credit for certain research activities.
- Retirement Plans: Contributions to retirement plans for business owners and employees can be tax-deductible, offering significant savings.
- Use of Tax-Advantaged Accounts: Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) offer tax benefits for health-related expenses.
Specific Tax Savings Strategies for Roofing Companies
Roofing companies have unique opportunities for tax savings due to the nature of their work and the assets they use. Here are some strategies specific to the roofing industry:
- Section 179 Deduction: Section 179 of the IRS code allows businesses to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. For roofing companies, this could include vehicles, machinery, computer equipment, and office furniture. The limit for Section 179 deductions is $1,050,000 for 2022, with a spending cap on equipment purchases of $2,620,000.
- Bonus Depreciation: In addition to the Section 179 deduction, the Tax Cuts and Jobs Act expanded bonus depreciation to 100% for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. This means roofing companies can deduct the entire cost of eligible business property in the year it’s placed into service.
- Domestic Production Activities Deduction (DPAD): Although DPAD was repealed for tax years after 2017, roofing companies that manufacture, produce, grow, or extract qualifying production property in the United States could benefit from this deduction in the past. However, the Tax Cuts and Jobs Act replaced DPAD with a new tax benefit called the deduction for Qualified Business Income which provides a tax reduction of up to 20% of qualified business income from a qualified trade or business.
- Energy Efficiency Tax Credits: If a roofing company installs energy-efficient roofing materials, such as cool roofs or solar roofing panels, it could be eligible for various federal and state energy efficiency tax credits.
- Small Business Health Care Tax Credit: If a roofing company has fewer than 25 full-time equivalent employees, pays an average wage of less than $50,000 a year, and pays at least half of employee health insurance premiums, it might be eligible for a tax credit of up to 50% of the premiums it paid.
Navigating the tax landscape can be complex, and taking full advantage of these tax-saving strategies often requires expert guidance. Therefore, businesses and roofing companies should consider working with a tax professional or CPA well-versed in business taxation to ensure they’re maximizing their tax savings while remaining compliant with all relevant tax laws and regulations.
By implementing these tax-saving strategies, businesses can minimize their tax burden, improve their bottom line, and reinvest more of their earnings into growth opportunities. Particularly for roofing companies, understanding the unique tax benefits associated with the industry can lead to significant savings, fostering the company’s financial health and long-term sustainability.
We recently helped one of the more well-known roofing companies in Temple with their taxes. They have always done them themselves, but decided to try professional accounting this year. The owners were very pleased with the savings, and over the moon about how little effort and time it took them compared to years past. Anyone running a roofing company or a small business should try a professional county from when it comes time to taxes.
