Tuesday, September 24, 2013

Accounting Apps for Mobile / 15 Best Online Personal Finance Software Apps

Beyond.com writes: Just a few years ago, the idea that mobile apps had a place in the business world would've earned a laugh. Apps were regarded as kid's stuff. With the rise of Web 3.0, however, the idea of doing serious work from a tablet or smartphone started to earn a little respect. Apps are serious business now, and serious businesses from freelancers to Fortune 500 companies are taking notice. Among the first areas to benefit from this new appreciation is accounting apps. The uniquely number-centric world of accounting makes an accounting app—whether for home finances, payroll processing, or accounts receivable—a natural choice for business. There are now so many accounting apps, in fact, that some sort of guide is called for.

Starting on the home front, a number of accounting apps are optimized for personal budgeting. While the emphasis in personal accounting apps is generally on simplicity, some are sophisticated enough to handle the books for a small or home-based business. Personal accounting apps such as CalendarBudget and BudgetPulse combine an intuitive interface with colorful charts and graphs to clarify your income and expense tracking.

Moving up the scale of complexity, you'll find a number of accounting apps that place emphasis on flexible account tracking, rather than colorful outputs. The idea seems to be that the users of these accounting apps will be professionally engaged, as opposed to casual, users who need to use the apps every day. Accounting apps such as IExpenseOnline and Mint pile up features such as investment tracking and currency converters.

More than a few of these accounting apps are offered for free. This is especially true for the smaller-scale personal finance apps. You can still find some good deals higher up on the scale, though, if you're willing to look around. Yodlee MoneyCenter is free, for example, and offers such high-end features as net-worth reporting and mobile alerts. It doesn't even have in-app ads to distract you. Other accounting apps do charge a fee, usually monthly, but even here there are deals to be had. eFinPlan has long been a favorite of accounting professionals, and the $98 annual subscription can be cut in half for elderly or disabled individuals, as well as for single parents.

Accounting apps have come from nowhere in the last few years to become an indispensable part of today's business climate. Ordinary people are using them to keep track of groceries, freelance writers are using them to handle contract work and to keep an eye on payments, and even account managers at large companies have begun to supplement their in-office software with something they can work on from home. It would appear that the accounting mobile apps have arrived.


15 Best Online Personal Finance Software Apps


 Shelley Elmblad for About.com writes: Looking for a good web app to manage money? Here are the best choices for online personal finance and budgeting software.  


BudgetPulse

Set up your budget in BudgetPulse free online financial software.BudgetPulse.com
BudgetPulse is free online personal finance software that's easy to use without sacrificing meaningful budget tools and financial reports. This app is also great for anyone who doesn't want to enter financial account numbers and passwords to download transactions automatically. You can download transactions yourself from your bank and import them, or enter via your keyboard. Savings goals can be made public for fund raising or giving family and friends a chance to chip in toward reaching goals.


Mint
Manilla

Manilla online bill and financial account organizer.Manilla Accounts
Manilla is a relative newcomer to online personal finance apps. While it has no budgeting tools, it removes the complication from keeping an eye on financial account balances, paying bills on time and managing magazine subscriptions and travel reward points.
Mint.com has excellent budget graphs to help you with tracking your budgeted spending.Mint.com/Intuit
Mint is very popular online money management software that tracks all your accounts in one place while offering some great financial tools. Although not a personal financial management feature, Mint finds customized financial products and services that can save you money, but keeps these offers tucked away unless you want to see them. Mint is free, and took first place for 2011 Best Online Personal Finance Software.

CalendarBudget

CalendarBudget is an online money management tool that tracks daily spending.Screen Shot by Shelley Elmblad
CalendarBudget is a free online app that shows financial transactions and upcoming bills on a color coded calendar. This app will help you budget and then forecast your financial picture into the future for years to come.

IExpenseOnline

IExpenseOnline is web-based personal expense management software and budgeting software.IExpenseOnline Home Page
IExpenseOnline is ideal for those who want to do detailed budget and expense tracking. IExpenseOnline is free, the look of the app is easy on the eyes and it's simple to use.

moneyStrands

Track your spending with moneystrands online personal finance softwaremoneystrands Spending Graph
Among the nifty features in moneyStrands is an upcoming bills calendar, multiple currency support, money saving offers and a 15 day free trial. As of March, 2011, moneyStrands suspended automatic account aggregation for an extended period of time. Currently, there is no ETA for restarting this important feature, so if you don't want to enter transactions manually, consider one of the other selections.

Yodlee MoneyCenter

Yodlee MoneyCenter Expense Analysis Report lets you monitor your budget.Yodlee MoneyCenter Expense Analysis Report
Yodlee MoneyCenter provides a consolidated view of personal finance accounts, along with net worth reporting, a budgeting tool, mobile and email alerts and more. Yodlee MoneyCenter is free and has no ads, and has online bill pay.

ClearCheckbook

ClearCheckbook online financial software manages personal finances, always accessible online.ClearCheckbook Home Page
ClearCheckbook is free online personal finance software that tracks account and your budget in one place. Because account numbers are never entered into ClearCheckbook, your data is secure.


Mvelopes

The toolbar in mvelopes makes it easy to use the online application to budget.Mvelopes Online Budgeting Software
Mvelopes is an online personal finance app that combines envelope budgeting principles with a great set of other money management tools, an online community and access to 24x7 help. A debt reduction tool is included.

Depending on the subscription plan chosen, Mvelopes costs $9.95 per month or $95 per year, which includes online bill pay. A free version is available, but minus some features and with limited accounts and envelopes.


PearBudget Online Budgeting Software

PearBudget is very simple online financial software that tracks a budget and helps with savings.PearBudget.com
PearBudget is simple web-based personal budgeting software that uses an envelope budgeting model to help you to avoid debt and overspending. PearBudget costs $3 per month.

Google Chrome Money Management Apps and Extensions

The Chrome Web Store has free and paid money management apps and extensions.TurboTax Online in Chrome Web Store
Screen Shot by Shelley Elmblad
The Chrome Web Store has free and paid money management apps and extensions, which make handling financial tasks from within Chrome very convenient. Check out the money management apps at the Chrome Web Store. Most are free.

Facebook Money Management Apps

Use Smart Saver on Facebook to manage savings goals.Smart Saver Facebook App
Millions of people visit Facebook every day to get status updates and news from friends. Did you know you can also track the status of your personal finances on Facebook?

iGoogle Gadgets

Track your Buxfer budget on one of your iGoogle pages.Buxfer iGoogle Gadget
iGoogle pulls information from a wide variety of sources to give you a highly customizable online personal start page including some nifty financial gadgets to add to your iGoogle pages.

eFinPLANNeoBudget Online Budget Software

NeoBudget Online Budgeting Software reduces debt.NeoBudget is a copyright of Tebros Systems
NeoBudget is envelope budgeting software that uses images to show much money as been set aside to pay bills or for savings. NeoBudget includes a debt reduction module to help you with your online budget. NeoBudget costs $2.50 per month.
Do your own in-depth financial planning with eFinPLAN.eFinPLAN Financial Planning Software


Posted on 9:47 AM | Categories:

Reducing Tax Liability of Mutual Funds

Shelly Schwartz for Fox / Bankrate writes: When it comes to mutual fund investing, it's not what you earn that matters as much as what you manage to keep.
Indeed, the net return on your portfolio can be hugely impacted by how much you surrender each year to Uncle Sam.
Not convinced?
Consider hypothetical taxable investments of $10,000 into two mutual funds that both have pretax total returns of 10% per year. One fund, however, has an after-tax return of 9%, and the other has 7%.
After 30 years, the investment with the smaller tax liability grows to almost $132,677 after taxes -- roughly 75% more than the $76,123 produced by the more heavily taxed fund.
Investment Annual pretax return After-tax return Value of investment after 30 years
$10,000 10% 9% $132,677
$10,000 10% 7% $76,123
Despite the clear advantage of tax efficiency, however, the significance is often lost on individual investors, as it is for many managers of actively traded equity funds whose only focus is pretax returns.
For those who own securities exclusively in tax-sheltered accounts, such as individual retirement accounts and 401(k)s, the need to manage tax liability is minimal. But those with both taxable and tax-deferred investments should take the threat of tax drag on performance seriously -- especially those in the upper income brackets, says Mark Luscombe, principal analyst for tax accounting group CCH in Riverwoods, Ill.
"(Managing tax liability) becomes more significant the higher your tax rates are and especially for those subject to the new, higher tax rates in 2013," says Luscombe. "There are new incentives to do something about it."
Effective this year, couples earning more than $250,000 may be hit by a new 3.8% Medicare surtax on net investment income, while joint filers with taxable income greater than $450,000 will face a 39.6% top marginal income tax rate, plus a bump to 20% from 15% on qualified dividends and long-term capital gains.
Your tax liability
Mutual funds that are not held in a tax-advantaged account produce taxable distributions each year in the form of dividend income, interest generated from bond funds and capital gains, created when securities held within the fund are sold.
As an investor, you will also owe capital gains when you sell shares of the fund at a profit.
Proceeds from investments held for one year or less are considered short-term capital gains and are taxed more heavily at your ordinary income rate, while securities held longer than one year are considered long-term gains and taxed at 20% for those in the highest 39.6% tax bracket.
Those in the 25% through 35% brackets pay 15% tax, and those in the lowest two brackets -- 10% and 15% -- pay zero.
Asset location vs. allocation
While asset allocation -- the process of determining the right mix of stocks, bonds and cash -- is your first order of business in portfolio planning, where you park those securities within your portfolio can make a big difference in your tax liability and long-term returns, says Maria Bruno, a senior investment analyst for The Vanguard Group.
"Asset allocation is the primary driver, but asset location becomes significant as you implement that allocation," she says. "It's very important when you have different accounts to know what types of assets to allocate where."
Generally speaking, your most tax-efficient funds are best reserved for your taxable brokerage accounts, says Bruno. Those include investments that do not produce a high yield, such as total market index funds, municipal bonds and tax-managed funds.
Conversely, actively managed funds, which may distribute capital gains in addition to dividends, and narrowly focused index funds belong in tax-deferred accounts such as an IRA, 401(k) or variable annuity. So, too, do taxable bond funds, which include high-yield bond funds, Treasuries and Treasury inflation-protected securities, or TIPS, since dividends are taxed as ordinary income.
The Roth advantage
Christine Fahlund, a senior financial planner and vice president with T. Rowe Price, notes that placing investments in a Roth IRA is another effective way to lower your future tax bill -- especially for younger investors.
Contributions to a Roth IRA are not tax-deductible since they are funded with after-tax dollars, but the earnings grow tax-free. With a traditional IRA, pretax contributions are deductible and benefit from compounded growth, but distributions upon retirement are taxed as ordinary income.
All else held equal, says Fahlund, Roth IRAs are a better bet for tax-conscious investors.
"We feel very strongly that as soon as you can live without all or some of the income tax deduction you would receive (by making contributions to a traditional IRA), it is to your benefit to contribute to a Roth," she says. "When the money comes out, it's all yours."
"If someone is really concerned about paying taxes, they might consider a portfolio of only index funds, but we prefer the 'core and explore' method," says Justin Sinnott, a Seattle-based financial adviser for Charles Schwab & Co.
The investment strategy of core and explore consists of using index funds for efficient markets and actively managed funds for inefficient markets.
Growth-oriented small-cap and international mutual funds are two examples of inefficient markets, says Sinnott, since financial data are less readily available on the companies they invest in. Thus, managerial expertise is required to outperform.
Large-cap funds, by contrast, are more liquid and more transparent, requiring less hands-on maintenance. As such, notes Sinnott, they are generally best suited for the index fund portion of an investor's portfolio.
Tax-managed mutual funds are another option.
Managers in such funds keep their tax drag low by reducing turnover, purchasing tax-free or low-tax securities, avoiding dividend-paying stocks, and using losses to offset capital gains (a practice known as harvesting losses).
All that maneuvering, however, doesn't come cheap.
Michael Rawson, a fund analyst for Morningstar, notes tax-efficient funds tend to be pricier than similar funds from the same provider.
"It really needs to be worth your while to pay for that service," says Rawson, adding that such funds are best suited to taxable accounts for those concerned about taxes.
From a tax-efficiency standpoint, index exchange-traded funds are also often described as a better bet than their mutual fund counterparts, partly because they keep turnover low but also because they produce fewer capital gains using a mechanism known as "in-kind redemptions."
Indeed, many ETFs require authorized participants to exchange shares for a basket of securities rather than cash, allowing the fund to raise cash without having to sell securities.
Here again, however, Rawson warns that not all ETFs are more tax-efficient than mutual funds.
"Tax efficiency is based upon good portfolio management, not the structure of the fund," he says.
“If someone is really concerned about paying taxes, they might consider a portfolio of only index funds, but we prefer the 'core and explore' method.”
Time your purchase
When buying dividend-paying mutual funds, the tax-conscious investor should also be mindful of year-end distribution dates.
Why? Mutual funds are required to distribute at least 98% of their income and gains to shareholders each year, prompting many to make large dividend payments in December.
In tax-deferred accounts, this won't make any difference to the investor. However, in taxable accounts it will because these distributions are treated as income, even if the investor reinvests them in more shares instead of receiving them in cash.
"If you're buying a mutual fund between September and November, check to see whether it's paying a big capital gains distribution, and if it is, you might want to wait until after (the distribution)," says Catherine Taylor, vice president and counsel of the corporate tax division for Ameriprise Financial in Minneapolis. "You don't want to 'buy the dividend.'"
Mutual fund investors who have assets in both taxable and tax-deferred accounts can better their odds of enjoying a comfortable retirement by taking an interest in tax efficiency.
"In the markets, there are many factors that are outside of an investor's control, but one area where investors can have a direct impact on performance is tax planning," says Rawson.
Posted on 9:47 AM | Categories:

Intuit QuickBooks vs Xero Stock Prices, Xero Wins Big, / Intuit Deathwatch 5

Mike Block for Quickbooks Xero Blog writes:The best way to compare Intuit (QuickBooks) vs Xero is to compare stock prices.
This also is the most dramatic and objective way to show what smart investors believe about the relative future of Intuit vs Xero and their products. This single measurement combines all the factors and opinions of everyone, in a single unquestionable summary. You can argue with the result below, but you are not arguing with me. You are arguing against everyone's combined judgment, which everyone backs with his money.
Big differences in stock price changes, as there are in this five-year chart, tend to create a self-fulfilling prophecy. Winners are far more likely to get the extra capital needed to expand quickly and survive problems. This is especially important once you learn that stock prices are a leading indicator. That is, they tend to predict the future effectively. In the case of Intuit vs Xero, the future in this chart very clearly show Xero wins big, VERY BIG!
Big3
Intuit (INTU - brown line) stock did not do badly. It looks like their stock price rose around 150% over the five years. However, Intuit did not come remotely close to the almost 2400% price increase that Xero (blue line) stock had over the same period. XERO WAS 16 TIMES BETTER THAN INTUIT over the last five years.
Investors might decide that Xero was even more than 16 times better than Intuit if they realized that Intuit often increases stock prices (or bails out insiders) with company stock buyback programs. Such buybacks relate to when a company feels its stock should sell for more or when it has no good use for money. However, buybacks leave a company with less money to grow its business. In the case of Intuit, buybacks were an incredible $4.911 BILLION through July 31, 2012 (see page 59, Treasury stock). That looks like $274 million more than Intuit earned throughout its history!
What is even more interesting is that Intuit recently sold or will sell website, real estate, financial service and medical service businesses. It lost about $320 million ($1.35 billion cost, $1.03 billion sale) on a July 2013 Digital Insight sale alone. Most important, Intuit, "would use the proceeds from the IFS deal to boost its share repurchase program... As of April 30, Intuit had $1.4 billion remaining for stock repurchases under the program..."
WOW! These stock buybacks will not happen all at once, bt this means Intuit now has $2.43 billion for buybacks. It had $2.744 billion of book value at July 31, 2012, after $792 million of income, less $178 million of dividends (net $614 million). Adjust the book for the $320 million loss and net book is $2.424 billion. Therefore, new stock buybacks will soon (not immediately) exceed book value. Alternatively, they will exceed four years of after-sale income. Getting rid of these businesses, without spending this money on current businesses, seems to mean that Intuit is anticipating smaller future operations. Therefore, it is EFFECTIVELY ALREADY LIQUIDATING! No wonder Intuit insiders sold more than $1 billion in stock in four years. Intuit CEO Brad Smith, in particular, seems only to have stock option shares and sells most of them fast.
 
So where does Intuit stock go from here?Intuit has a stock market capitalization of about $20 billion. A trailing price earnings ratio of 32 ($20 billion / $614 million) seems very excessive for an effectively liquidating company, with little book value, especially this makes it look like Intuit has already given up. That is why this post is Intuit deathwatch 4.
 
So where does Xero stock go from here?It looks like Xero stock will keep increasing rapidly. It currently has a market cap of about $2 billion, but recent U.S. and international conferences spotlighted already very successful U.S. efforts with leading QuickBooks supporters. Xero CEO Rod Drury recently said that the massive U.S. accounting market was now the fastest-growing area for Xero. Intuit was always a primarily U.S. play. However, the beautiful Xero software has long been multi-currency and multi-lingual, with happy customers in more than 100 countries (as of more than two years ago).
Xero also focuses on professional accountants, many of whom deeply resent Intuit for repeatedly discrediting (do your taxes [or accounting] without an accountant), ignoring and damaging them and their clients (despite recent Intuit claims, made intermittently before). Accountants also particularly appreciate the multiple redundant Xero computers, at multiple highly secure locations, with continuous backup, vs the Intuit hosting they saw repeatedly fail, for as long as five days at a time. We also increasingly know that QuickBooks is the worst place for data. This should result in fast switches of U.S. users, with rather low Xero marketing costs.
Xero also will scale up far better than Intuit's already dying QuickBooks desktop, which recently lost 17% of users, or the slow growing and limited QuickBooks Online (I would rather go to a dentist than use it). This partly relates to a free, industry-standard, RESTful Xero add-ons interface. Compare this to very expensive, often-changed, overlapping and proprietary QuickBooks equivalents.
Intuit surveys showed that add-on users are far more loyal and upgrade far more often than non-add-on users, but Intuit made a top developer write Demise of the Third Party QuickBooks Developer. It also exactly repeated the add-ons mistakes that Peachtree (Sage) made in its war with QuickBooks ($1,000/month per add-on developer). That is why anIntuit Deathwatch post shows QuickBooks lost 70% of web add-on links in 21 months and Xero will have many more tested add-ons than QuickBooks in a few months.
There is one more big reason that Xero will scale up far better than QuickBooks. If you think that Xero is only a small business play, think again. Xero now uses NetSuite (the #1 cloud ERP suite) internally. I know NetSuite (see story) from a short stint as a part time NetSuite spokesperson. A friend and I were the first NetSuite consultantsbut this died when NetSuite went from $5 to $10 to $100/month, in around 15 months. A later shock involved getting a new client off a $2,800/month NetSuite contract, with no cancelation provision.
On the other hand, NetSuite is perfect for a genius like Rod. He has long been using Rackspace and other highly respected secure web hosts. Unlike a rather new static Intuit web host facility, Rackspace users can scale up or down very quickly. I have no doubt this already lets Rod increase and decrease computer power, every day and night, on a rotating schedule around the world. It also will let Xero very rapidly scale up when Rod decides that he knows enough, about NetSuite and Xero, to give us Xero for large companies.
That is why Xero stock should go much higher. With a market cap of about $2 billion,  Xero is well on its way towards exceeding Intuit's $20 billion market cap. If anything, Xero professional accountant focus, better global reach and scalability should take it far higher.
Posted on 9:46 AM | Categories:

7 New Tax Changes Every Entrepreneur Needs To Know

Holly Magister for Forbes writes: President Obama’s Administration put forth a proposal for the fiscal year 2014 federal budget several months ago. Included in the Administration’s 256-page explanation  are many significant proposed changes for taxpayers, including entrepreneurs. As America watches the political showdown in Washington DC this week, the entrepreneur may want to take note of the proposed tax changes, which if passed by Congress, would impact his business and/or personal tax bill.


10% Tax Credit for New Jobs and Wage Increases

For employers with less than $20 million in OASDI (Old Age Survivor and Disability Insurance) wages in 2012, a general tax credit will be available and based on the increase in the wage base. The maximum tax credit is $500,000 per employer. This tax credit proposal would be temporary if enacted and would not apply to self-employment wages.

Permanently Extend the Code Section 179 Deduction

Entrepreneurs who invest in depreciable tangible personal property for the use in their trade or business in 2013 are eligible to expense up to $500,000 for such expenditures and are subject to a phase-out limitation if total capital expenditures exceeded $ 2million. For qualifying property placed in service in taxable years beginning after 2013, present law states that the limit is set to revert to a $25,000 Code Section 179 expense deduction with a $200,000 phase-out limitation.
The proposal would permanently allow for a $500,000 Code Section 179 expense deduction with a $2 million phase-out limitation which would index for inflation in years beginning after 2013.

Reinstate the Federal Unemployment Surtax

On July 1, 2011, the 0.2 percent FUTA surtax expired and has not been reinstated since. The proposal would permanently reinstate the additional 0.2 percent FUTA surtax assessed against the first $7,000 wages paid to every employee annually. If this proposal is enacted, the annual FUTA tax per employee will increase from $42 to $56. This proposal would take effect for wages paid on or after January 1, 2014.

Expand and Simplify the Tax Credits for HealthInsurance

Since 2010, qualified employers who make uniform contributions of at least 50% of the employee’s health insurance premium may qualify for a tax credit. Among other requirements, to be considered qualified an employer may not have more than 25 full-time equivalent employees during the taxable year. Such employees may not have annual full-time equivalent wages that average more than $50,000.
The current law provides for a phase out on a sliding scale between 10 and 25 full-time equivalent employees. Another phase-out is imposed when the average annual wage of the employer’s full-time equivalent employees falls between $25,000 and $50,000. This knocked out many, otherwise eligible employers from being eligible for the Health Insurance tax credit.
The proposal addresses the phase out issues and would ensure that most employers with fewer than 50 employees having average wages of less than $50,000 become eligible for the credit. It also eliminates the ‘uniform contribution’ and ‘State average premium’ requirements which currently eliminate many employers from eligibility. This proposal would be available for taxable years beginning after December 31, 2012.

Upper Income Taxpayers Reduced Tax Deductions and Income Exclusions

Entrepreneurs in the upper income tax brackets (33%, 35%, and 39.6%) currently are able to reduce their taxable income by excluding certain types of income and claiming certain deductions when computing their AGI (Adjusted Gross Income). AGI in the United States Tax Code is a pivotal figure. It is used as a threshold in various tax computations when preparing a taxpayer’s annual federal tax return.
In recent years, many taxpayers have been surprised by their sudden increase in federal tax due to the Alternative Minimum Tax, which is driven from the taxpayer’s AGI.
The proposal would limit the tax value of specific deductions, such as contributions to HSA, Archer, and MSA’s. It would also limit the value of exclusions from AGI such as the employee contributions to defined contribution retirement plans and IRA’s, employer-sponsored health insurance paid for by employers, health insurance costs of self-employed taxpayers, etc.
The limitation proposed would reduce the value of various deductions and income exclusions from the upper income tax rates of 33%, 35% and/or 39.6% to 28% making tax deductions and income exclusions less valuable.

Doubling the Start-Up Expense Deduction

The proposal would permanently double the amount of start-up expenditures that an entrepreneur may deduct in the first year of business from $5,000 to $10,000 and would be effective upon enactment.

Require Small Employers to Auto-Enroll Employees in IRA’s

This proposal requires employers in business for more than two years who have more than ten employees to automatically enroll employees in a Traditional IRA or ROTH IRA, unless an employer-sponsored, qualified retirement plan, SEP or SIMPLE is offered.
Employees who do not opt out of the IRA would be automatically enrolled with a default contribution rate of three percent of the employee’s compensation.
For those small employers with no more than 100 employees and who offer the automatic IRA arrangement may be eligible to claim a temporary, non-refundable tax credit for their expenses related to setting up the plan. The tax credit amount is dependent upon the number of enrolled employees and is available for six years.
Posted on 9:46 AM | Categories:

The Tax Break Most 'Green' Entrepreneurs Forget

DEAN ZERBE for Entrepreneur writes: Could your company use a tax deduction of hundreds of thousands of dollars? If so, read on.
While entrepreneurs are clearly seeing the opportunities of the green economy, many are not fully profiting from a key tax break that rewards their everyday environmental endeavors -- 179D of the tax code.
For many architectural or engineering firms contracted by federal, state or local institutions -- including state universities -- there is a very good chance the work they perform on a daily basis could save them hundreds of thousands of tax dollars. If this sounds too good to be true, you are not alone in thinking so. An astoundingly low number of these businesses actually take advantage of tax-saving energy incentives.
The 179D deduction benefits architects and engineers when they design a new construction or renovation for energy efficient buildings for the government. Any business performing these services on buildings at the federal, state and local levels may receive a deduction of up to $1.80 per square foot, an obvious financial boon depending on the size and scope of the project.
Take for example a firm I've worked with that was designing a major international airport. To reduce the building's impact on surrounding groundwater, the firm created a water reclamation system, known as a "Water Box," to collect and cleanse rainwater from the roof through a series of filters releasing back into the environment. Alterations to both the interior and exterior of the building were made and energy-efficient lighting and equipment was inserted to help reduce the use of electricity and natural gas. The tax deduction for this firm under 179D was $723,096.
What buildings qualify? The definition of what constitutes a building under 179D is very broad and includes a variety of structures such as office buildings, factories, warehouses, parking garages, schools, universities, airports -- basically any structure that is built for any level of government.
How green do you have to be? The key to remember is that it is not a high hurdle to qualify for 179D. While the example above is impressive, qualifying firms just need to surpass 2001 ASHRAE standards -- standards that most state codes already surpass.
In addition, the building can partially qualify based off the exterior, HVAC or lighting system. Bottom line: you don't need grass on the roof or a windmill to qualify for 179D.
Here are four steps to help you get there:

1. The tax code allows eligible parties to benefit from 179D for any government buildings they designed (or retrofit) that have been placed into service in the last three years -- so be mindful of those buildings.
2. Confirm your business can benefit from 179D from a tax perspective. You may have qualifying government buildings you designed; you may have great green designs for those buildings -- but be sure it makes sense from a tax point-of-view before moving forward.
3. secure an allocation letter from the government entity. The policy behind 179D was that Congress wanted to encourage energy efficient commercial buildings -- including government buildings. Recognizing that government entities basically don't pay tax, Congress allows the governmental entity to transfer the tax deductions of the energy efficient green building to the designer. This transfer of the tax benefits is accomplished through a specific "allocation letter" signed by the government entity.
A key to understand: you not only need to get the allocation letter, you need to ask for it before any designer receives an allocation letter for the project. It's a first-come first-served tax benefit.
4. 179D is a trust-but-verify tax provision, meaning that you need to have an independent engineering firm review the building (modeling, on-site visit, etc.) to confirm the energy savings. We've found in practice this is actually a good thing, with our engineers sometimes finding greater energy savings after an on-site visit.
With Section 179D, entrepreneurial architects, engineers and construction firms that are engaged in green design for the government can see significant tax savings to help grow and expand their business.
Posted on 9:46 AM | Categories: