4 Tax-Saving Hacks for Breweries
Tax season can be a headache for any business owner, especially those in the brewery industry.
But surely, there are a few tax hacks that can help reduce your tax liability to Uncle Sam…?
Don’t worry, our accountants have you covered.
In today’s blog, we’re discussing four effective tax-saving strategies that our dedicated brewery accountants recommend to help you save big time on your taxes.
The four tax-saving hacks for breweries are:
- The Work Opportunity Tax Credit
- 401k Profit Sharing
- The R&D Tax Credit
Tax-Saving for Breweries: The Work Opportunity Tax Credit
First on our list is the Work Opportunity Tax Credit.
The IRS will give you a few thousand dollars in tax credits for hiring people from certain targeted groups, such as veterans and disabled persons. This is a great way to get money back while also helping those in need and improving customer and community relations.
Here are the nitty-gritty details:
- The WOTC is available for wages paid to certain individuals who begin work on or before December 31, 2025.
- The WOTC may be claimed by any employer that hires and pays or incurs wages to certain individuals who are certified by a designated local agency (sometimes referred to as a state workforce agency) as being a member of one of 10 targeted groups.
- In general, the WOTC is equal to 40% of up to $6,000 of wages paid to, or incurred on behalf of, an individual who:
- is in their first year of employment;
- is certified as being a member of a targeted group; and
- performs at least 400 hours of services for that employer.
- The maximum tax credit is generally $2,400
Tax-Saving for Breweries: Depreciation
Next, we have depreciation.
This is a two-part hack that involves either slowing down or speeding up your depreciation.
Most accountants will see that you bought an asset and take the 100% tax write-off allowed by the IRS.
But for some brewers, this may not be the best decision.
If you spread your depreciation over five years, you can potentially save more on your taxes in years when your profits are higher.
On the other hand, if you own your building, you can speed up your depreciation by doing a cost segregation study to identify shorter asset lifetimes.
It’s important to work with your accountant to find the best possible tax strategy for your unique business. No pun intended.
Don’t have a tax accountant that you’re happy with? Book a free call with us to chat about your options here.
Tax-Saving for Breweries: 401K Profit Sharing
The third tax-saving hack for breweries on our list is the 401k profit sharing.
Did you know that you can max out over $60,000 a year into your retirement account?
And the best part is that you can deduct it from last year’s taxes, but don’t have to pay it until you actually file your tax return.
This gives you the flexibility to wait until 2023 when you have a better understanding of the economy.
We’ll do a deep dive into the best retirement accounts to consider in the future. The important part is that you’re putting it away!
We recommend working with your accountant to find the best retirement account and strategy for you.
Tax-Saving for Breweries: The R&D Tax Credit
Finally, we have the R&D Tax Credit.
The R&D Tax Credit stands for Research & Development and rewards you for any “innovation” or “research” you conduct in your business.
As a qualified small business (yes, breweries qualify!) with qualifying research expenses, you can apply up to $250,000 of your research credit against your payroll tax liability.
Qualifying activities for R&D in a brewery can be as simple as creating a new recipe, testing small batch recipes, converting them into mass production, designing custom equipment, and more.
The IRS recently changed the rules on amortizing R&D costs over five years, but taking the R&D Tax Credit is most likely still the best course of action.
And even better, many states offer additional R&D tax credits on top of the federal credit.
There are only 14 states that don’t offer this additional tax credit.
Work With a Brewery Accountant to Save Even More $$
In conclusion, these four tax-saving hacks for breweries can help you save big on your taxes and give you peace of mind during tax season.
However, we strongly recommend working with an experienced brewery accountant to formulate the best tax strategy for your business.
If you don’t have a brewery accountant you’re happy with, we’re always here to help.
Use our quick form to book a complimentary call with one of our team members to chat about your current accounting situation.
We take a holistic view of your business to let you know where there are gaps and where there are opportunities to pursue.
What do you have to lose?
Otherwise, we hope that you found this blog post helpful and informative.
If you have any questions or comments, please let us know by reaching out to us here.