In parts one and two of this three-part series, the Miami construction litigation attorneys of Cotney Construction Law have been exploring some of the changes to the Internal Revenue Code resulting from the Tax Cuts and Jobs Act of 2017 (TCJA). Now, we will discuss the remaining effects of TCJA that directly affect contractors and construction business owners.
Simplifying Long-Term Contracts
TCJA resulted in an amendment to Section 460, rendering taxpayers exempt to the “percentage-of-completion” accounting method typically used for long-term construction contracts so long as their average gross receipts are calculated under $25 million for the last three tax years. This is great news for small businesses and contractors who need assistance with keeping the cost of accounting and bookkeeping at manageable levels.
Historic Rehabilitation Tax Credit
To improve historic structures and ensure their continued use, TCJA provides a 20 percent tax credit for approved expenditures that rehabilitate these types of structures. This allows contractors to take on historical rehabilitation contracts aimed at repairing or improving historic buildings. This includes:
- Hard costs: walls, chimneys, stairs, windows, and doors.
- Soft costs: architect fees, construction management costs, and developer fees.
Mortgage Interest Deduction Limits
According to Construction Business Owner, TCJA “reduced the mortgage interest deduction to $750,000 of acquisition indebtedness for debt incurred after Dec. 15, 2017.” This will invariably have a negative effect on residential construction companies who do business in areas where rent is steep.
The changes resulting from the TCJA are vast and numerous, affecting companies across a broad spectrum of industries. This is especially true for the construction industry. Although many of these changes have a positive effect on contractors, it’s important to consult a Miami construction litigation attorney about any possible changes to your duties and responsibilities resulting from this sweeping change in legislation.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.