There are many lucrative federal and state tax credits and incentives available to companies which could result in tax savings. Those savings could be invested in hiring new employees, developing new products or services, purchasing new equipment or even just improving your profitability. We look holistically at potential tax credits and incentives that may be available for your company in the context of your entire tax planning strategy. This ensures that companies actually get the maximum benefit from credits and don’t waste time or money on credits that aren’t ultimately beneficial to you. At Aprio, our dedicated tax advisors help clients understand all the options available to them, whether that’s securing a tax credit or searching out other government programs that could increase your bottom line, allowing you to reinvest in what’s next.
1. GENERAL BUSINESS TAX CREDIT
This catchall tax credit is comprised of a number of individual tax credits designed to motivate business owners to undertake specific activities, such as purchasing qualified electric vehicles, getting into new markets and retaining employees. Some of these tax credits are covered below.
2. CREDIT FOR SMALL EMPLOYER HEALTH INSURANCE PREMIUMS
If you want to provide health insurance coverage to your employees—and get a tax credit in the process—this one is for you.
3. CREDIT FOR PAID FAMILY AND MEDICAL LEAVE
This tax credit was authorized by congress in 2017 to motivate small business owners to provide paid leave to their employees covered by the Family and Medical Leave Act. It provides certain employees up to 12 weeks of unpaid, job-protected leave, plus access to group health benefits, every year.
4. ALTERNATIVE FUEL CREDITS
These niche tax credits are calculated from the costs associated with the production of alcohol-based fuels such as methanol and ethanol, and other alternative fuels including biodiesel or renewable diesel. The idea behind it is to encourage business owners to invest in other fuels to reduce the U.S. dependence on imported oil.
5. ALTERNATIVE MOTOR VEHICLE CREDIT
Take advantage of a tax credit of up to $8,000 that encourages the purchase of an alternative fuel source vehicle.
6. DISABLED ACCESS CREDIT
This tax credit encourages businesses to make their offices and other facilities fully accessible to people with disabilities. This might include installing ramps, improving storage and display units, upgrading restrooms and providing text in braille.
7. CREDIT FOR EMPLOYER-PROVIDED CHILDCARE FACILITIES AND SERVICES
Here’s a tax credit for businesses that directly pay the childcare expenses for their employees or help their employees secure childcare. The credit is for 25% of expenses, plus 10% of childcare resource and referral expenditures, up to $150,000 a year
8. REHABILITATION, ENERGY AND REFORESTATION INVESTMENTS CREDIT
This tax credit is for investments in reforestation, building rehabilitation and alternative energy property used in business. The credit is generally 10% of expenditures and is limited to $10,000 per year.
9. QUALIFIED RESEARCH EXPENSES CREDIT/INCREASING RESEARCH ACTIVITIES CREDIT
These small business tax credits are designed to encourage domestic research and development. The calculation of the credit can be very complex, but it can also provide substantial tax savings.
10. SMALL EMPLOYER PENSION PLAN STARTUP COSTS CREDIT
This is a small business tax credit designed to offset the costs of starting a pension. The credit is limited to $500—or 50% of your startup costs. You can claim it for the first three years of your plan.
11. WORK OPPORTUNITY CREDIT
This is a tax credit available to businesses that hire employees who have traditionally faced significant barriers to employment. Some barriers, such as lack of transportation, are temporary and easier to address than others like education, childcare or disabilities.
12. EMPOWERMENT ZONE AND RENEWAL COMMUNITY EMPLOYMENT CREDIT
Here’s a tax credit for businesses that hire someone who lives and works in a low-income area. The U.S. Department of Housing and Urban Development created empowerment zones to stimulate development in low-income areas.
13. NEW MARKETS CREDIT
This tax credit supports businesses that invest in community development enterprises (CDEs) and community development financial institutions (CDFIs), which are organizations that help low-income communities.
14. TAX CUTS AND JOBS ACT
Small business owners filing their 2018 taxes were able to take advantage of new legislation that provided a 20% tax break. One of the features of the Tax Cuts and Jobs Act (TCJA) is a qualified business income deduction. It allows owners of “pass-through” entities, including sole proprietorships, S-corporations and partnerships, to deduct up to 20% of their qualified business income.