Looking for an Investment with a High Rate of Return?

By: Chris Martin

Tax incentives offered by the Federal government to encourage businesses to increase their energy efficiency are opening the door to great returns on capital investments. One of these incentives is the Energy Efficient Commercial Buildings Tax Deduction (CBTD). This deduction was created by the Energy Policy Act of 2005 and is designed to reduce the initial cost of investing in energy-efficient lighting and other building systems via an accelerated tax deduction.

The CBTD enables building owners (or tenants) to deduct the cost of renovating a building’s interior lighting system, heating, cooling, and hot water systems, and building envelope in the year the new equipment is placed in service, limited to $1.80/sq.ft. The owner (or tenant) could also upgrade one of these three systems and claim the CBTD capped at $0.60/sq.ft. Essentially, utilizing this deduction allows the cost of new lighting or other building systems to be claimed in a single tax year instead of depreciated over a period of years.

Instead of simultaneously retrofitting all three systems, it is often more feasible to focus on upgrading one system. The most profitable investment in energy efficient building systems is lighting. While the area of interior lighting has seen significant cost saving innovations become available over the last decade, the Department of Energy states that 80% of existing commercial buildings continue to operate lighting systems installed before 1986. Considering that lighting represents 40% of the average commercial building’s electric bill, retrofitting these outdated lighting systems can be very profitable. According to the Energy Cost Savings Council, energy-efficient lighting projects generate an average 45% return on investment, paying for themselves in just 2.2 years

Interested in upgrading your lighting or other building system? Be sure to discuss in detail your plans to upgrade your building with your tax advisor, as the CBTD has a number of detailed requirements that must be satisfied before you project even begins.

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BCG Blogger, June 21st 2011 | Tags: , , , , , , , ,
Posted in Family Business, Small Business, Tax Strategy, Tax Updates

U.S. and International Accounting Standards Convergence: What this change in accounting practice means for small- and mid-sized businesses

By: Pam Wright, CPA

So what is the International Financial Reporting Standards (IFRS) system and how will it affect the small and mid-sized businesses?

Basically, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) together are converging to establish a single set of accounting standards which will be known as IFRS. Currently, over 115 countries have adopted IFRS, which is becoming the predominant accounting framework outside the United States. It is estimated that the United States will move towards some form of IFRS by 2016.

IFRS is a principles-based system of accounting in contrast to the current U.S. GAAP, which is rules-based, meaning the new standards would require much more judgment on the part of accountants. U.S. GAAP currently is 17,000 pages of documentation, compared to IFRS for SMEs, which is only 300 pages and a simpler format which will be easier to digest.

Small- and mid-size businesses should be aware that there are two versions of international reporting standards. IFRS for SMEs (small and medium-sized entities) intends to address the different needs and requirements of non-public companies. IFRS for SMEs is actually available for use by qualifying entities; though they are not yet being routinely adopted mostly due to the banks’ current requirement of U.S. GAAP prepared financial statements.

BCG & Company will continue to monitor these developments and provide updates with the latest information.  If you have any further questions, please contact your BCG & Company representative.

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BCG Blogger, April 29th 2011 | Tags: , , , , , ,
Posted in Family Business, Small Business, Tax Updates

Medical Premiums Could Equal a Tax Credit

By: Tim Stiller, MT

As we previously mentioned in 2010 Tax Saving Opportunities for Small Business, the Small Business Health Care Tax Credit can put some money back in employers’ pockets if they pay medical premiums for their employees. An employer qualifies as a small business if it has no more than 25 employees with average annual wages of less than $50,000. The credit is worth up to 35% of the premium costs in 2010 and 50% in 2014, and is based on the lesser of the amount paid by the employer on behalf of the employees, or the amount the employer would have paid if the employee were enrolled in a plan with premiums equaling the average in the state. In Ohio, the average premiums are as follows:

  • Employee-only Coverage: $4,667
  • Family Coverage: $11,293

For more information, check out the IRS website, or to check the average premiums in your state, check out the CompleteTax website.

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BCG Blogger, July 27th 2010 | Tags: , , ,
Posted in Family Business, Small Business, Tax Credits

Give Your Kids A Job – And Keep a Little More in Your Pocket Too!

By: Tim Stiller, MT

As school is letting out, many students are looking for summer jobs. As we all know, the job market is still looking pretty bleak, even for part-timers. There is an upside for parents with a family business. Instead of just giving your kids money, there’s a way they can earn it, and save you some money in the process. Take a look at this example:

A business person in the 33% tax bracket for 2010 hires her 17-year-old son to help with office work full-time during the summer and part-time into the fall. He earns $5,700 during the year (and doesn’t have earnings from other sources). If that $5,700 otherwise would be paid to the business person, she saves $1,881 (33% of $5,700) in income taxes at no tax cost to her son, who can use his $5,700 standard deduction for 2010 to completely shelter his earnings.

Even if the child’s income exceeds $5,700, the overall family tax bill is still cut because the income will be taxed at rates beginning at 10% rather than the parent’s rate.

When used alone this technique is effective at saving money, but the savings can be increased even more by combining it with other tax incentives such as IRA deductions and education credits.

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BCG Blogger, June 14th 2010 | Tags: , , , ,
Posted in Family Business, IRA Deductions, Tax Credits