You know about the power of tax deductions to minimize your small business’s tax liability. But are you taking full advantage of business tax credits? While deductions reduce your taxable income, tax credits reduce the tax you owe on a dollar-for-dollar basis.
Here are eight federal tax credits your business might be eligible for.
Small Business Health Care Tax Credit
Eligible small businesses can get a tax credit for providing employees with health insurance. To be eligible, you must have fewer than 25 full-time equivalent employees, pay average annual wages of less than $50,000, and pay premiums for all employees equal to at least 50 percent of the cost of employee-only insurance.
Get details about the Small Business Health Care Tax Credit.
Retirement Plans Startup Costs Tax Credit
Have you set up a Simplified Employee Pension, SIMPLE IRA or other qualified retirement plan for employees? If so, you may be eligible for this tax credit, which lets you claim 50 percent of the costs of starting the plan, such as setup, administrative costs and employee education.
Get details about the Retirement Plans Startup Costs Tax Credit.
Credits for Employer-Provided Childcare
If you provide childcare for your employees, either on-site or by contracting with an outside facility, you may qualify for a tax credit equal to 25 percent of those childcare expenses up to $150,000. For those with an on-site facility, the credit is applied to setup costs and operating expenses. If you contract with an outside provider, you must pay the facility directly in order to claim a credit.
Get details about the Employer-Provided Child Care Credit.
Federal Empowerment Zone Employment Credit
Do you have employees who both live and work in a federal Empowerment Zone (a designated urban or rural area that is economically disadvantaged)? Then, you may qualify for an employment credit of up to $3,000 per eligible employee through the end of 2016. Find a list of empowerment zones in the Instructions for Form 8844, which is used in claiming this credit.
Get details about the Empowerment Zone Employment Credit.
Work Opportunity Tax Credit
The WOTC aims to encourage hiring people from groups that traditionally have a hard time finding jobs, such as military veterans, welfare recipients, ex-felons and the long-term unemployed. Companies that hire eligible workers may be able to take a tax credit of $1,200 to $9,600, depending on the type of employee and duration of employment. There’s no limit on how many employees you can claim.
Get details about the Work Opportunity Tax Credit.
Employer Wage Credit
If you have employees who are active duty members of the uniformed services and you pay them full wages (known as differential pay) while they’re serving in combat or in training for active duty, you may be eligible for a tax credit. You can claim 20 percent of up to $20,000 of differential wage payments, up to $4,000 per qualified employee.
Get details about the Employer Wage Credit.
Indian Employment Credit
Do you have an employee who is an enrolled member (or whose spouse is an enrolled member) of an Indian tribe, lives on or near an Indian reservation, and performs all of his or her work for your business on an Indian reservation? You may be eligible for a tax credit based on the first $20,000 of qualified wages and health benefits paid to such employees, up to $4,000 per employee.
Get details about the Indian Employment Credit.
Disabled Access Credit
This credit offsets costs of providing disabled access to your business. Qualifying businesses (those with 30 or fewer full-time employees and earnings of $1 million or less the previous year) can take this credit for every year in which they spend money on disabled access.
Get details about the Disabled Access Credit.
For a full list of federal tax credits your business may be eligible for, check the IRS website. Your state may offer additional business tax credits. Talk to your accountant to determine which tax credits apply to you.