Aerospace Industry

The aerospace sector involves high R&D spending, complex manufacturing, and substantial capital investment, all areas that are candidates for tax incentives.

Ideal Candidates:

Aerospace manufacturers
R&D companies
Satellite developers
Defense contractors

Here’s an overview of how Aerospace companies can benefit.

Research & Development (R&D) Tax Credits

Aerospace companies typically qualify for substantial R&D credits due to:

Engineering design for new aircraft, systems, or components
Prototyping and testing (wind tunnels, simulations, etc.)
Software development (flight control systems, simulation tools)
Improvements to materials, fuels, or aerodynamics

Benefit: Up to 10% of eligible R&D expenses as a dollar-for-dollar tax credit.

Cost Segregation

New or renovated aerospace manufacturing facilities, hangars, or R&D labs can benefit from accelerated depreciation:

Breaks down building components (e.g., lighting, electrical systems, finishes) into shorter tax lives
Increases cash flow and lowers taxable income early on

Benefit: Accelerated depreciation deductions of 20–50% in the first year.

179D Tax Deduction

Applicable to aerospace manufacturing or office facilities that undergo energy-efficient upgrades (lighting, HVAC, envelope):

Deduction of up to $5.00 per square foot (as of 2023 updates)
Often available to both building owners and designers of government-owned facilities (e.g., defense contractors)

Benefit: Immediate deduction and potential transferability for design firms.

What Services are Included?

45L Tax Credit

If the company develops residential workforce or military housing:

Up to $5,000 per unit for energy-efficient residential properties
Applies to low-rise apartments or single-family homes meeting ENERGY STAR or Zero Energy Ready standards

Benefit: Reduces tax liability for aerospace housing development subsidiaries.

Section 263A (Uniform Capitalization Rules) & Fixed Asset Reviews

Reviews capitalized assets for:

Misclassified repairs that should have been expensed
Capital items eligible for partial disposition or write-off
Identify significant missed deductions on aircraft fleets or facilities

Benefit: Retroactive deductions and better asset management.

IC-DISC (Interest Charge – Domestic International Sales Corporation)

Export Tax Incentive for aerospace exporters:

Shifts income into a tax-advantaged structure
Can apply to aircraft parts, systems, or services sold abroad

Benefit: Up to 20% tax savings on qualifying export income.

Form 3115

A Form 3115 - Application for Change in Accounting Method, allows businesses to request approval from the IRS to change their accounting method. This form might be required when making changes to claim various tax credits.

Changing Depreciation Method
Inventory Method
Accounting for Repairs vs. Capital Improvements

Benefit: Tax relief through audit protection, improved financial reporting accuracy, potential tax benefits, and compliance with IRS Regulations.

Payroll Tax Reduction Strategy

Companies with W2 employees will qualify for this tax credit program.

Proven ROI with significant Payroll Tax savings recognized on first payroll cycle
Eligible employees see an increase in net take-home pay
Zero upfront or out-of-pocket cost to employer or employee
Attract and retain top talent
Audit compliance

Benefits: Employer FICA Tax Savings is $56.80 per month or $681.60 per year per eligible employee. Employee FICA/State/Federal Tax Savings includes an approximate 3-4% increase in monthly net take-home pay.