Maximizing Your Tax Return on a Development Project

Development projects are large, complex undertakings that often require the input of dozens, if not hundreds of people in a variety of roles from construction managers and architects to attorneys and compliance staff to ensure that your project runs smoothly and profitably. One of the most important and, crucially, guaranteed returns, is through tax savings which can help you offset the cost of a project by the thousands, tens of thousands, or even millions given the scale of the project. There may be ups and downs in the market but a return on your taxes can help buffet you from strong economic winds.

Are there tax differences based on the type of deal?

There are significant tax differences based on the type of tax paid: either income or capital gains. For those who say that there is little difference in profitability and a tax is a tax, there is a significant difference in between these taxes that can amount up to a 25% difference in profitability. Thus, it is in the interest of the property and project owner to get the lower tax rate. However, you should embark on this with the experience of a qualified and experienced accountant and legal representation only.

Can I incorporate environmentally friendly features in order to lower the tax burden?

There are a variety of federal, state, and even local tax benefits that you can enjoy by incorporating environmentally friendly features into your development project. From energy efficient lighting to way to reduce HVAC costs, there are real long-term savings that these improvements can guarantee for you and your company. Additionally, besides the tax benefits, there may be long-term energy savings that offset any initial cost or long-term reinvestment costs to keep your building “green.”

Use depreciation to help ensure that you take advantage of tax savings for assets that you use

If an item is placed in service, that item begins to depreciate and the value of such depreciation can be deducted on your federal taxes. For example, structural components of a building usually have a 39 year tax life while personal property generally has a five or seven year tax life. Working with your accountant, you can categorize your assets appropriately and help ensure that you get the biggest tax advantage from depreciation of assets that you’ve invested in in order to make your development project a long term success.

How should I begin planning when it comes to ensuring my development project is a success at tax time?

While most believe that they can read the tax code and deduce what tax breaks they qualify for, only the services of an accountant or accounting firm can provide guidance as to how to structure a deal, in what year to place items into service, and even what environmentally friendly moves to make to help ensure that your project is a tax success. Contact our offices today to speak to an MKS&H tax professional so we can begin planning for your future.