When you run a small business, taxes can appear to be your worst nightmare. While you’re trying to scrape by on minimal profits so that you can grow your company and reach your vision of a successful future, taxes continue to creep up on you month after month. It can feel like you’re pushing a giant boulder up a hill and not getting anywhere. What you might not realize is that there are mechanisms and regulations set up to help your business succeed. Here are six worthwhile tax credits and incentives that you need to know about for your small business.
1. Employee Retention
The Employee Retention Tax Credit came about during the COVID-19 Pandemic to reward business owners like you for keeping jobs available during a very tough economic situation. While the details of this tax credit are complicated, there is an online ERC application you can access to find out if you are eligible. You can still apply even though the government has lifted most of the restrictions relating to the Pandemic. You should apply if:
- You had W-2 employees in 2020 and 2021
- And your business revenue decreased in 2020 and 2021
- Or a government shutdown impacted your business negatively
Don’t hesitate to apply if you think you qualify for this credit. There are real tax benefits to doing so.
2. Work Opportunity
If you are interested in employing people who experience difficulties in society, it could work out for your business in the form of the Work Opportunity Tax Credit. Depending on the nature of your business and what types of jobs you create, you might consider employing veterans, ex-felons, people who live in designated community zones, people who receive federal welfare benefits, designated summer youth employees, and more.
There are actually 10 categories that the IRS lists of types of employees who might qualify for the WOTC. It’s worth exploring this tax credit in detail as you grow your business and begin to open new positions in your company.
3. Childcare and Facilities
As a business owner, you can get tax credits for providing childcare facilities or for paying for the childcare of your employees. Of course, there is a cap when it comes to deducting payments for your employee’s childcare, but this can be a game-changer for a small business owner. Not only is this tax credit an easy one to take advantage of, but it is also something that can help you hire working parents.
4. Health Insurance
If you run a business with a very small workforce, 25 employees or less, and you also provide healthcare for them, you should be taking advantage of the Small Business Healthcare Tax Credit. This is a federal credit that the government offers because healthcare is such an important aspect of the working culture.
Obviously, the cost of healthcare in the U.S. is astronomical, and if you are willing to work within the Small Business Health Options Program Marketplace to find qualifying plans for your employees and then you pay half of the premiums, then you can take this beneficial tax credit.
5. Research and Development
As part of your regular operating procedures, you might incur expenses for research and development, depending on the kind of business you own. Fortunately, the government is becoming more friendly toward R&D and wants more companies to invest in these aspects of running a business. That means there may be some tax incentives and credits you can take advantage of if you pay for things such as:
- An environmental impact study
- Certification tests
- Improving software and technology
- Developing a new formula or product
- Making a model or prototype
6. Hiring and Expansion
At the end of the day, you need to remember that both state and federal bodies want small businesses to succeed because it benefits the economy. As your business starts to grow, you may be able to take advantage of local or federal incentives for creating jobs, hiring certain types of people, and expanding your business.
Avoiding your taxes will only result in more stress. If you embrace the possibilities of tax credits and incentives, you may get more out of it than you imagine.
