3 Ways Your Auto Body Business Can Get Tax Credits Normally Reserved for High-Tech Companies
Maybe you don’t know much about Research & Development (R&D) tax credits – though they have been around since 1981, they have been growing in popularity since 2015 when the PATH Act made it easier for smaller businesses to qualify.
Could you be missing out on this tax advantage? Although approximately 30% of R&D in the U.S. is conducted by automotive companies, less than one-third of qualifying companies actually apply for this lucrative credit!
The goal of the R&D tax credit, which allows up to 13% of eligible expenses as a credit, is to drive experimentation and innovation, and to advance technology – developing and testing new or improved products and processes.
Here are three ways your body shop could be eligible for the R&D tax credit:
- Design, create or test a new automotive part design. Developing parts made from lighter weight materials, such as carbon fiber, is considered an important innovation as this aids manufacturers in their efforts to improve fuel efficiency.
- Improve an existing process. The way we’ve always done things isn’t necessarily the best way to do them. If you can make an existing process or product better than it was, a R&D credit could be your reward.
- Enhance environmental or worker safety. Innovative efforts to create new products or processes that increase employees’ safety or protect the environment could be eligible for the R&D credit.
Check this out – between environmental regulations mandating higher fuel efficiency, continual software updates, and the myriad technological advances made each year in the automotive industry, collision repair shops are in a prime position to cash in on these credits.
In order to qualify for the R&D tax credit, your activity must pass a four-part test, and supporting documentation must be provided. Check out some other tips for avoiding costly tax mistakes with my free download, valued at $79: 5 Tax Mistakes That Cost You Thousands.