by Reade Pizzonia, Account Manager, Maloney & Company, LLC
As 2017 drew to a close, President Trump and the U.S Government agreed upon a new tax policy which went into effect as of January 1, 2018. A few weeks prior to the policy reform getting approved, the policy appeared unlikely to provide a benefit for architects and engineers. However, thanks to representatives from the AIA and ACEC lobbying with policy makers in Washington D.C, architects and engineers will now be eligible for a 20 percent tax deduction. The reason for this last-minute change was that AIA and ACEC representatives argued that design professionals should not be classified as a service business. Instead, the representatives made a case that design professionals should be classified more like manufacturers than consultants. Firms that are categorized as “pass-through” businesses (i.e- LLC, sole proprietorship, S-corp) are eligible for this 20 percent deduction.
The second benefit that came from the AIA and ACEC lobbying is that the Historic Tax Credit (HTC) will not be abolished as proposed in the original tax bill. The new HTC eliminates the original 10 percent credit for structures built before 1936 and dilutes the current 20 percent credit for certified historic structures by spreading the credit over a five-year period.
Please contact your tax professional to see how these changes will affect your firm.