The Administration is planning to raise taxes, increase IRS authority, hire more agents, and do more tax return audits

The $1T and $3.5T infrastructure bills are coming before Congress this week. How will all this additional spending get paid for? With more taxes.

Oh yeah, the debt ceiling is coming up again Friday, October 1. It’s the same story every time. We wait until the last minute or shut the government down.

Many argue that could be a good thing. Though, I believe a functioning and fiscally responsible government would be better. Is that too much to ask?

What can you do?

The anticipated increases in tax rates are leading to core IRS solutions. Hence, now is the time to evaluate your 2021 tax plan for what you can within the confines of the current tax code. Investing in and/or developing real estate is one of the great ways to mitigate your tax liability.

Here are four IRS approved methods to leverage your real estate or business as a tax hedge

Cost Segregation: We break a building into its components that have a shorter taxable life than straight line depreciation allows. This allows these reclassified assets to be depreciated faster to reduce tax liability and increase cash flow. In addition, 100% Bonus Depreciation is available to allow all components with a life of less than 20 years to be taken in year one.

EPAct 45L Residential Building Energy Tax Credit: There is a $2,000 tax credit per qualifying dwelling unit. For example, the developer of a 250 unit apartment complex could receive up to a $500,000 tax credit. This tax credit expires on 12/31/2021, though if previously missed, it can be taken in past open tax years.

EPAct 179D Commercial Building Energy Tax Credit: There is a tax deduction available of up to $1.80 per square foot. This breaks down to $0.60/SF for each building subsystems; 1) the Envelope, 2) the HVAC/Hot Water systems, and 3) the Lighting/Lighting Controls. A newly constructed 100K/SF building could receive a $180,000 tax deduction. This does not have an expiration date.

R&D Tax Credit: Essentially a wage based credit for companies to drive innovation and new product development. This credit is recurring each year for innovation of new products, improving current products, and improving developmental processes. Many firms and industries may qualify and do not realize it. It’s not just for Big Pharma and Big Tech. This tax credit does not have an expiration date.

There are many other tax strategies out there you may use. These are the four core options that revolve around real estate and business innovation. To take advantage of these, you will need an engineered or specialty study by qualified experts, like ELB Consulting.

If you want to learn more, reach out to info@elbcostseg.com or your personal ELB Consulting contact.