The tax code allows what I like to call a “phantom deduction” for companies that produce tangible property within the United States. I call it a phantom deduction because it appears out of thin air! It’s not like a typical deduction that results from spending money in a way that is tax deductible. Anyway, unless you love taxes and tax theory, all you really need to know at this point is that there is a tax benefit available to U.S. producers.
Obviously, this benefit is available to typical manufacturers such as car manufacturers, etc. What fewer people realize is that this benefit is also available for the manufacture and engineering of real property (like roads and buildings). This means activities such as engineering, architecture, and construction related to real property can receive the special deduction!
What many people are surprised (and delighted) to discover is that these activities don’t have to be related to brand new real property; they only have to be related to a substantial improvement of real property! So, this is where Micro-Businesses can often benefit. Small carpentry, plumbing, or electrical firms can qualify for activities related to remodeling buildings! The only caveat is that these firms must both make a profit for the year and pay wages.
For more details, I’ve attached a one page brochure I made for our firm, Small Business Accounting & Tax, Inc.
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