Jan. 31, 2005: Contractors Are Eligible For New Tax Incentive
"Any tax cut is always a good thing for any business," said Plumbing-Heating-Cooling Contractors-National Association (PHCC) member Mark Giebelhaus of Marlin Mechanical, Phoenix, Ariz. "Considering the thin margins that most contractors work with, a 3 to 6 percent reduction in taxes can be a significant benefit to growing our businesses."
In the construction field, the deduction provides a tax savings on profits on construction or substantial renovation of real property, including residential and commercial buildings and infrastructure. The IRS guidelines describe that substantial renovation is based on whether such "...activities result in permanent improvements or betterments of property, such that the cost of the activities must be capitalized...and must materially increase the value of the property, substantially prolong the useful life of the property, or adapt the property to a new or different use."
"This means that plumbing and HVACR contractors who are aware of this new tax incentive can look forward to significant tax savings on eligible construction and renovation jobs," said Lake Coulson, PHCC's vice president of government relations. "We encourage everyone to consult with their accountants soon to begin considering what projects may qualify in 2005."
Information on the new tax incentive was included in recently issued guidelines from the Internal Revenue Service. The new guidelines incorporate the provisions of the American Jobs Creation Act, which was enacted late last year. The IRS Notice that includes the interim guidelines will be published in Internal Revenue Bulletin 2005-7, dated Feb. 14, 2005.
For more information, visit www.irs.gov.
Publication date: 01/31/2005