As we reach July, the halfway point of the year, it’s an ideal time for manufacturers to evaluate their tax situation and plan effective strategies to reduce their 2024 tax liability. Every company’s situation is unique, but here are seven tax-reduction moves to consider.
1. Purchase New or Used Equipment
Under Section 179 expensing deduction, manufacturing companies can deduct the full cost of qualified new or used equipment—such as milling or drilling machines—placed in service during the tax year. For 2024, the limit is $1.22 million. If the cost of equipment and other eligible assets exceeds an annual threshold of $3.05 million, the maximum Sec. 179 expensing deduction is reduced dollar-for-dollar. Note that Sec. 179 expensing can’t exceed net taxable income from business activities.
If you’re unable to fully deduct your 2024 equipment investments with Sec. 179, new or used equipment may also qualify for first-year bonus depreciation. For 2024, this is 60% of the cost of qualified assets. Any remaining costs can be recovered over time through regular depreciation deductions.
2. Conduct Research and Development
Investing in technology today can increase output and streamline operations in the future. One tax-saving option is to determine whether your manufacturing company’s research and experimentation expenditures qualify for the research and development (R&D) credit. The research credit generally equals 20% of qualified expenses above a base amount. Alternatively, a simplified 14% credit can be elected. Note that R&D expenses must be amortized over a five-year period.
3. Save Tax Dollars by Going Green
The Inflation Reduction Act (IRA) introduced and expanded several clean air tax incentives for domestic manufacturers. These include:
- A new production tax credit for energy-saving property with solar and wind energy components.
- The revival of the advanced energy project credit, generally 30% of the cost of constructing, refitting, or expanding a manufacturing facility with qualified property.
- The extension of the solar investment tax credit (ITC), which now includes energy conservation technologies, fuel cells, microturbines, energy storage systems and components, and energy-saving property with solar, wind, water, geothermal, or other renewable source components.
Manufacturers can also benefit from a credit for electric vehicles (EVs) comparable to the EV credit available to individual taxpayers.
4. Utilize the QBI Deduction
Owners of manufacturing companies structured as pass-through entities can benefit from the Section 199A deduction based on their qualified business income (QBI). The deduction is generally equal to 20% of QBI. However, if a taxpayer’s income exceeds the applicable threshold, additional limits apply. The deduction generally can’t exceed the greater of:
- 50% of the amount of W-2 wages paid to employees during the tax year, or
- 25% of W-2 wages plus 2.5% of the cost (not reduced by depreciation taken) of qualified property owned by the business.
5. Ramp Up Accessibility Accommodations
Manufacturing companies may be entitled to tax benefits for making their facilities more accessible to disabled employees. The disabled access credit is available to manufacturers with gross receipts of $1 million or less or no more than 30 full-time employees. It’s effectively equal to 50% of the first $10,000 of qualified expenses, with a maximum of $5,000. This credit can be claimed for removing structural barriers or providing accommodations to hearing-impaired individuals.
Additionally, manufacturers of any size can deduct up to $15,000 of costs for removing architectural and transportation barriers to benefit disabled employees. Qualified costs include making accommodations to parking lots, building ramps, and installing accessible water fountains and restrooms. Normally, these costs must be capitalized.
Manufacturers can claim both the credit and the deduction in the same tax year (but not for the same expenses).
6. Take Advantage of Targeted Jobs Credits
In today’s tight labor market, consider widening your search for job candidates and potentially qualifying for a tax credit. For example, a manufacturer can claim the Work Opportunity Tax Credit (WOTC) if it hires a worker from one of several target disadvantaged groups. Generally, the WOTC is equal to 40% of the first $6,000 of first-year wages, with a maximum of $2,400 per worker. In some cases, the credit can be higher. The WOTC has expired and been reinstated multiple times and was recently extended through 2025.
7. Repair Your Facility
If your manufacturing company needs to replace broken windows or repair a leaky roof, the tax law allows you to deduct the full cost of repairs. Consider taking care of these minor nuisances before the end-of-the-year crunch. Conversely, the cost of capital improvements must be depreciated over time. Distinguishing between repairs and improvements can be challenging, but some IRS safe harbors can help:
- Routine maintenance safe harbor
- Small business safe harbor
- De minimis safe harbor
Act Now
July has arrived. Let us help you determine the midyear actions that will be most beneficial to your manufacturing company. Taking these steps now can lead to significant tax savings and set your business up for success in 2024 and beyond.
©2026
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