Construction - Specialty Tax Advisors

The Construction sector involves high capital costs, supports infrastructure, sustainability and green building initiatives, aids disaster recovery, and innovation and technology adoption, all areas that are candidates for tax incentives.

Ideal Candidates:

General contractors and subcontractors
Design-build firms
Construction firms with real estate holdings
Builders involved in public, energy-efficient, or modular construction

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

45L Tax Credit

For developers of multifamily or single-family housing:

Up to $5,000 per unit for homes that meet ENERGY STAR or Zero Energy Ready Home standards
Applies to apartments, condos, townhomes, and single-family homes sold or leased

Benefit: Reduces tax liability and enhances green ROI for residential developers.

179D Tax Deduction

Contractors and design-build firms working on government or non-profit projects may claim a deduction if they design:

HVAC systems
Interior lighting
Building envelopes
Eligibility: Must be the designer of energy-efficient systems in public buildings (schools, courthouses, fire stations, etc.)

Benefit: Up to $5.00 per square foot deduction, allocated from the building owner.

Research & Development (R&D) Tax Credit

Construction firms performing innovative or custom work often qualify:

Design-build engineering and structural solutions
Sustainable construction techniques or materials
BIM modeling, prefabrication methods, and energy modeling

Benefit: Up to 10% of qualified wages, supplies, and contract expenses as a tax credit—available to contractors of all sizes.

What Services are Included?

Cost Segregation

Firms that build or own construction yards, warehouses, or offices can:

Reclassify site lighting, paving, specialty plumbing, and other assets into shorter depreciation categories

Benefit: Accelerated depreciation leads to significant year-one deductions and improved cash flow.

Section 263A (Uniform Capitalization Rules)

Construction companies often overcapitalize costs:

Materials, engineering, and overhead expenses may be misclassified
A fixed asset review can unlock prior-year deductions

Benefit: IRS-compliant catch-up deductions under Section 481(a).

Prevailing Wage & Apprenticeship Compliance (IRA Tax Credit Enhancer)

Construction companies working on renewable energy projects may:

Access bonus credits (e.g., 5x 179D or 45L credits) if they meet Prevailing Wage and Apprenticeship (PWA) standards

Benefit: Multiplies energy and sustainability credits when labor standards are met.

State & Local Incentives

Construction firms operating in specific markets may qualify for:

Hiring credits
Equipment investment incentives
Tax-exempt financing for infrastructure or affordable housing projects

Benefit: Additional layered incentives beyond federal programs.

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

Export Tax Incentive is limited for the Construction Industry, but manufacturers of US made construction materials, modular building or components may qualify if exported:

IC-DISC allows export profits to be taxed as qualified dividends

Benefit: 10–15% reduction in federal tax on export-related 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.