At EB Tax Consultants, we know that every credit counts when it comes to filing taxes for small businesses. There are a huge number of small business tax credits, and very few individuals or tax preparation firms know all of them. However, these credits are extremely important because they reduce the amount of your taxable income dollar-for-dollar. Your Brooklyn tax preparer can help you get every credit you are entitled to by taking a close look at your business’s financial situation.
To encourage businesses to offer health insurance benefits, the government developed a tax credit that specifically targets small businesses. In fact, the smaller the business, the more advantageous the credit.
In order to qualify, you must have less than 25 full-time employees (or the equivalent). Each employee must make $50,000 per year or less. In addition, you must pay at least 50 percent of your full-time employees’ health insurance premium costs. The health insurance coverage that you offer should be through the SHOP Marketplace to qualify.
If your business meets these requirements, then you could take a credit for up to 50 percent of your contribution toward employee health insurance. You do not need to offer health insurance to your part-time employees (those who work less than 30 hours per week) to take advantage of this tax credit.
The legislature developed a tax credit incentive for small businesses who want to start up a pension plan for their employees. In order to qualify for this credit, the business must have less than 100 employees and has not had a retirement plan for at least the three years prior to claiming the credit.
The credit is 50 percent of the costs of creating the plan, up to a maximum of $500. This credit applies for the first three years that the plan is in effect. That means that you must spend $1,000 for three years to receive the full amount of the credit. Of course, any expenses that do not fall under this credit are still deductible as regular business expenses.
Small businesses are also encouraged to make their facilities friendly to those who may be disabled. This credit is available to those who must alter their properties in some way to comply with the Americans with Disabilities Act of 1990. Expenses for items such as ramps, handrails, or elevators would likely qualify. The credit would also apply to expenses related to making audio and visual materials available to the hearing or visually impaired. There is a “reasonable and necessary” qualification so that businesses do not go overboard with this type of expense.
The credit is only available to businesses that have less than $1 million in gross receipts or have less than 30 full-time employees. Businesses in certain categories are likely to qualify, including hotels, theaters, convention centers, restaurants, bars, service establishments, and nurseries. The credit is for 50 percent of your eligible expenses that are over $250, but not more than $10,250.
Part of the Investment Tax Credit is the Energy Tax Credit. This credit is not limited to small businesses, but few small businesses take advantage of it.
This credit is designed to encourage businesses to use alternative energy by providing credits for things like installing solar panels or using geothermal energy. It will provide the business a credit of up to 10 percent of the costs of purchasing and installing these alternative energy systems. For the property to qualify, it must be depreciable and it must be actually used in your business.
Building restoration and reforestation also fall into the Investment Credit, so be sure to check with your Brooklyn tax preparer if your business is engaging in any of these activities.
Childcare can be a significant work barrier for some employees. To combat this barrier, the IRS offers tax credits to those employers who help pay their employees’ child care expenses. The benefit to the employee can be substantial.
The business must directly pay the childcare expenses, but any amount that is over than $5,000 will be added to the employees’ gross wages. This credit is not technically limited to small businesses, but very few small businesses take advantage of this credit. The credit is for 25 percent of up to $150,000 in expenses ($37,500).
There are many more small business tax credits available. For example, certain types of businesses are eligible for specific credits that other types of businesses cannot use.
As a small business, getting every credit you are entitled to is important. Let EB Tax Consultants look over your business expenses for potential credits. Take a look at our business profile and click the Contact button to get started.
ERNIE BUSTAMANTE