Texas has long been known for oil and gas, but manufacturing is an equally important part of the Texas economy. Today, the industry is becoming even more diverse, from traditional metal and equipment manufacturers to semiconductor, aerospace, chemical and advanced technology companies.
Texas had over 960,000 manufacturing jobs as of September 2025, and the state continues to be a major hub for domestic and international trade. Texas exports totaled $455 billion in 2024, making Texas the nation’s leading exporting state.
For Texas manufacturers, that growth and economic activity also bring more complex financial decisions.
Should we invest in new equipment? Expand the facility? Develop a new product? Take on debt to fund growth? Enter a new market? Start planning for the next generation of ownership?
Each decision can affect your company’s taxes, cash flow and financial position.
That’s why manufacturing accounting and tax planning shouldn’t be something you think about only when tax season rolls around. For manufacturers operating in a competitive and evolving Texas economy, the right strategy often starts before the purchase is made, the product is developed or the expansion begins.
At ADKF, we work with manufacturers throughout the year to help connect those decisions to the bigger financial picture. As a full-service accounting firm, our team can provide everything from tax planning and preparation and accounting services to consulting and financial guidance.
Your Next Investment Could Be a Tax Planning Opportunity
Manufacturers invest heavily in their businesses, whether that’s through new machinery, technology, facilities or product development. Those investments can create opportunities that are easy to miss if you’re only looking at the numbers after the fact.
Take a new manufacturing facility, for example.
A cost segregation study can identify certain components of a building that may be depreciated over a shorter period than the building itself. Accelerating depreciation may help a business generate deductions sooner and improve cash flow.
Recent tax changes also created Section 168(n), which provides a 100% special depreciation allowance for certain qualifying production property. For manufacturers planning new facilities or significant expansions, understanding the rules before construction begins can be particularly important.
Learn more about cost segregation from the IRS
Learn more about depreciation from the IRS
The takeaway? The earlier you bring tax planning into the conversation, the more options you may have.
You’re Probably Doing More R&D Than You Think
Ask a manufacturer whether they have a Research and Development department, and you may be told no, but research and development doesn’t always happen in a traditional laboratory.
Your engineers may be developing a new product. Your production team may be testing a new material. Your company may be experimenting with a different manufacturing process to improve efficiency, quality or performance.
Those activities may qualify for the federal R&D tax credit.
ADKF can help manufacturers identify potentially qualifying projects and expenses and determine whether the credit may be available. The goal isn’t to force every project into an R&D category. It’s to make sure you’re not overlooking legitimate opportunities that are already part of your business.
Learn more about the R&D Tax Credit from the IRS
R&D Rules Have Changed. Your Strategy Should Too.
The R&D tax credit is only part of the conversation.
The tax treatment of research and experimental expenses has changed significantly. Under current Section 174A rules, businesses generally can deduct domestic research and experimental expenditures, with an option to capitalize and amortize those costs instead. Foreign research expenses remain subject to different capitalization rules.
For manufacturers investing in engineering, product development and process improvements, understanding how these rules work together with the R&D tax credit can make a difference in your overall tax strategy.
Read the latest IRS guidance on R&D expenses
Tax planning shouldn’t be based on what worked a few years ago. Tax rules change. Your business changes. Your strategy should change with them.
What About Everything Sitting in Your Warehouse?
For manufacturers, inventory isn’t just a balance sheet number. It’s materials, labor, overhead and production costs tied up in the products you make.
That’s where the UNICAP rules under Section 263A come into play. These rules generally require manufacturers to capitalize certain direct and indirect production costs into inventory rather than deducting them immediately.
As your production processes and cost structure evolve, it may be worth taking another look at how you’re handling inventory costs.
Our team can help manufacturers navigate UNICAP and other inventory accounting considerations while making sure the accounting methods continue to make sense for the business.
Learn more about inventory accounting from the IRS
Growth Often Means More Financing. Don’t Forget the Tax Impact.
Growth is exciting, but it often comes with a need for financing.
Maybe you’re purchasing equipment, expanding a facility or acquiring another business. If debt is part of the plan, Section 163(j) may be an important consideration.
The rules can limit the amount of business interest expense a company can deduct, depending on its circumstances. Understanding those limitations before taking on significant debt can help manufacturers better evaluate the tax impact of financing decisions.
Learn more about Section 163(j) from the IRS
Selling Outside the U.S.? There May Be Another Opportunity.
Manufacturers that export qualifying products may also want to consider an IC-DISC.
An Interest Charge Domestic International Sales Corporation can provide potential tax benefits for qualifying export sales. It’s not the right strategy for every manufacturer, but companies with significant export activity may benefit from taking a closer look.
Learn more about IC-DISC from the IRS
And Eventually, Someone Has to Take the Reins.
For many privately owned manufacturers, the biggest question isn’t about this year’s tax return. It’s what happens next.
If you’re approaching retirement or thinking about how to transition ownership, an Employee Stock Ownership Plan (ESOP) may be one option to consider.
An ESOP can provide a way for employees to participate in company ownership while giving business owners another potential path for succession. It isn’t right for every company, and an ESOP transaction involves significant financial, tax, valuation and legal considerations.
But for the right business, it can be an important part of a long-term succession plan.
Learn more about ESOPs from the IRS
The Bigger Picture Matters
The common thread through all of these strategies is simple: the best tax opportunities are often connected to decisions you’re already making.
You’re buying equipment. Developing products. Building a facility. Managing inventory. Financing growth. Selling internationally. Planning for the future.
These aren’t just tax decisions. They’re business decisions that happen to have tax implications.
That’s why ADKF takes a proactive approach to manufacturing accounting and tax services. Our team works with manufacturers to understand how the business operates, identify opportunities and help connect accounting and tax strategy to the decisions that matter most.
ADKF helps manufacturers:
- Identify potential R&D tax credit opportunities
- Navigate current Section 174A rules
- Evaluate cost segregation and depreciation strategies
- Navigate UNICAP and inventory accounting
- Evaluate Section 163(j) considerations
- Explore IC-DISC opportunities for qualifying exporters
- Consider ESOPs and other succession strategies
- Plan for equipment, facilities and other major investments
- Improve financial reporting and decision-making
- Develop proactive tax strategies throughout the year
Your CPA shouldn’t just tell you what happened last year. They should help you think about what’s next.
