If you’re a small business owner, you’re probably aware of several different tax deductions that you are entitled to claim in order to legally lower your tax liability. What about small business tax credits, though? There are several credits available to incentivize small businesses, and if you’d like to claim some additional credits in the next tax season, take a look at some of the actions that might make you eligible to claim credit and boost your business.
Small Business Tax Credit for Disabled Access
If you have a physical office and you’ve incurred expenses related to installing a wheelchair ramp or other accesses for people with disabilities, you may be eligible to claim the disabled access credit. The minimum credit available on this small business tax credit is $5,000 if you’ve spent $10,000 in expenses related to access for disabled individuals.
The Alternative Vehicle Tax Credit
Alternative vehicles are continuing to grow in popularity, and the use of alternative fuel sources could be a benefit to you and your small business. There is a credit of up to $8,000 available if you choose a vehicle with an alternative fuel source as your company vehicle. Keep in mind, hybrids and electric vehicles are not eligible as they still use conventional fuel sources.
Consider applying this credit by choosing a vehicle which uses hydrogen fuel cells, like the Honda FCX Clarity, the only vehicle that the IRS recognizes for the credit at this point.
Retirement Plan Startup Credit
If you have a small business with less than 100 employees, you may be part of less than half of businesses that offer a qualified retirement plan. In an effort to encourage more small businesses to offer retirement plans, tax laws now offer a small business tax credit covering 50% of retirement plan startup costs. This covers up to $500 per year for a total of three years.
Though the cost of starting a retirement plan may be significantly higher than what the credit covers, it is still a good incentive to help businesses give back to their employees. In order to qualify for this credit, your business must have less than 100 employees and your employees must have made at least $5,000 from your business in the previous year.
Small Business Tax Credit for Child-Care
If your employees have children, you might want to consider covering child care at your workplace. Thanks to this small business tax credit, businesses who pay the child care expenses for their employees can receive a credit on 25% of the expense at up to $150,000 per year.
To explain the difference between the Employer-Provided Child Care Tax credit and the employee-paid Child and Dependent Care Tax credit, an example should suffice. Imagine that an employee pays for childcare at about $2,500. The claimable credit for that employee would be 35% of that expense ($875). If the employer pays for the child-care, he or she is going to save what the employee paid originally, the $875.
Keep in mind the employer, unlike the employee, is not subject to the $3,000 limit per child when claiming this credit. Not only could this credit benefit you financially, it could make excellent strides toward employee loyalty to the company.
Welfare to Work Small Business Tax Credit
This small business tax credit allows small business owners to hire employees, help out their communities, and receive credit for it. There are many aspiring workers who face barriers regarding their becoming employed. Some job seekers have work-related issues like disability, lack of education, lack of a reliable mode of transportation, child care challenges, and more. Hiring a worker with one of these challenges could make you eligible for the tax credit.
It’s calculated based on wages that are paid to employees and can be worth up to $9,000 in savings over a period of two years.
Because of this, you’re putting a job-seeker to work, helping the economy, expanding your business, and being rewarded for your efforts.
Research Expense Credits
Even if research and development are not standard processes in your company, you might be able to qualify for the small business tax credit related to qualified research expenses. Though calculating qualified research can be complex, being eligible for the credit could mean quite a few dollars’ worth of tax savings.
If you’re investing money in developing your products or new models of a product, you might qualify. If you’re developing a patent, taking a test for certification, or creating new technology, you might qualify. If you’re running environmental testing, developing software, or building a manufacturing plant, you might qualify.
It’s important to check with your tax professional to determine whether your research endeavors have you qualified for this tax credit to be certain.
Going Green Tax Credit
Energy efficiency is something that benefits everyone, but thanks to this small business tax credit, you might find that steering your business toward “going green” adds an extra benefit for you. Using more energy-efficient equipment can enable you to claim this tax credit.
The Business Energy Tax Investment Credit allows business to make purchases that go toward energy-saving tools like fuel cells, wind energy equipment, and items used to convert to using solar energy.
Small Business Tax Credit for Healthcare
There is a tax credit available that is meant to encourage small business employers to offer their employees health insurance, both for the first time and to maintain their current insurances.
With this credit, small businesses pay at least half of the cost of their employees’ single coverage insurance. With the needed qualifications met, you are allowed a credit of up to 50% of the premiums that you paid for your employees.
As a small business owner, finding ways to make your business as proficient as possible and developing strategies that reward you with tax credits is both intelligent and encouraged. Take advantage of some of these credits so that your work as a small business owner helps keep your money in your pocket, develops employee loyalty, and helps your business grow as part of your community.
If you’re in the market for a reputable tax preparer, consider West Austin Tax for your income tax questions and services. You can visit their website for information, video resources, or to schedule an appointment with one of our professionals. You can also call (512) 330-9400 for more support.
*West Austin Tax is not a CPA firm.