Tax time. Your favorite time of the year, right? If you're wondering about the latest in small-business tax credits, you're not alone. Changes to our nation's health care system alone have made tax time more complex for small businesses.
Don't fret. I've compiled a list of some of the most common small-business tax credits that your business might qualify for this year. This helps you start a conversation with your tax professional from a better place. If you're a do-it-yourselfer when it comes to filing your taxes, this list may help you make sure that you are taking advantage of some of the tax credits that might apply to your business.
1. Small-Business Health Care Tax Credit
Your business might be eligible for this tax credit if it...
- employs less than 25 full-time employees,
- pays those employees an average annual wage of less than $50,000 each and
- picks up an average of 50 percent of the health care premium costs for its employees.
Tax-exempt organizations are also eligible to receive this credit.
2. Work Opportunity Tax Credit for Hiring Veterans
If your business hired an unemployed veteran, your business might be eligible to claim this credit.
If the veteran you hired had been unemployed for at least four weeks, you may qualify to receive a tax credit of 40 percent of the veteran's first $6,000 in wages (with a maximum of $2,400).
Curious about whether your business and veteran hires qualify? Here's a handy guide from the Department of Labor, Employment, and Training Administration that explains more about the tax credit and how to apply for it after you've hired the veteran.
3. Work Opportunity Tax Credits for Hiring Other Qualified Employees
Has your business hired an individual that meets the qualifications of the Protecting Americans from Tax Hikes (PATH) Act? You may be eligible to claim a Work Opportunity Tax Credit as well.
The PATH Act includes (but is not limited to) persons who are long-term unemployed, have received benefits from SNAP programs in the past six months or have been convicted of a felony or released prison for a felony conviction. Form 8850 from the IRS includes test questions for employees who might qualify you for the tax credit. The amount of the credit is based on the wages you've paid to qualifying employees.
4. Disabled Access Credit
Making improvements to provide access for an employee with a disability may make you eligible for the Disabled Access Credit. To qualify, you must be a small business with less than $1 million or less in earnings and fewer than 30 full-time employees. This form and worksheet from the IRS can help you work through the tax credit.
5. Small Employer Pension Plan Startup Tax Credit
You might be eligible for a single-time $500 tax credit if you started an employer-sponsored pension plan for your business.
One qualification for the tax credit is employing 100 people or fewer who received at least $5,000 each in compensation for the year. To review additional qualifications and see if you're eligible for setting up a pension plan for your business, you can begin with this resource from the IRS. There's also a landing page for Form 8811 and associated worksheets to help you calculate your credit for eligible years.
6. State-Sponsored Small Tax Credits
If your state has a state income tax, you may want to research small-business tax credits that may be available for your state business tax return. A great way to find these is searching online for your state and "small-business tax credits." You can also check your state's Department of Revenue site and the state Secretary of State's office, both of which generally have a section for small businesses.
For both federal and state small-business tax credits, however, you may find that a tax advisor can be your strongest ally. Tax advisors stay up to date with new and changing tax credits for their business clients. They can help advise you on future hiring needs and tax credits available for hiring people who meet certain population demographics as well as make sure you're taking full advantage of the credits available to your business.
Even if you're an ardent believer in preparing and filing your business's taxes yourself, you might find a low-cost review with a tax professional useful. By spending a little money, you may be able to save by finding the right tax credits available to your business.
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