Small business tax credits you should claim
It is mandatory for business owners to pay taxes to the government. However, most small business owners don’t know they can save money on their taxes. Individuals and small business owners are eligible for rewards from their governments in the form of tax credits.
Tax reliefs are offered to small businesses for small or recognizable acts such as strengthening the economy, being a good employer, fighting climate change, and improving other people’s lives. Apart from the COVID-19 Business Tax Relief and Employee Retention Credit, which primarily became popular during the pandemic, you can also claim the following tax credits:
Disabled access credit
Disabled Access Credit was introduced to encourage small businesses to make their physical business locations accessible to clients with physical disabilities. This credit not only eliminates barriers to your business, but also gives you financial rewards for your efforts towards ensuring accessibility.
The Disabled Access Credit came into light after the Americans with Disabilities Act of 1990 made it mandatory for businesses with more than 15 employees to provide facilities that accommodate employees and customers with disabilities. ADA regulations also regulate access to public areas, such as restaurants and shopping malls.
Renovating your small business to make it accessible to people with disabilities is costly. You should build a ramp, space shelves appropriately, and provide accommodative text formats like braille. The government offers the Disabled Access Credit to reduce the financial impact of these upgrades on your business.
Small business health insurance premiums credit
This credit became available to small businesses after the enactment of Obamacare, also called the Affordable Care Act. Small businesses that provide health insurance to their employees qualify for the Small Business Health Insurance Premiums Credit. Other conditions that should be met for your small business to be eligible for this credit include:
- Have less than 25 full-time employees
- Pay an average annual wage of less than $55,000 per employee
- Pay at least half of their full-time employees’ health insurance premiums
If your small business qualifies for this credit, you’ll receive 50% of employer-paid insurance premiums. However, businesses can only claim this credit for two consecutive years.
Work opportunity credit
Small businesses are also eligible for Work Opportunity Credit. The government introduced this credit to incentivize small businesses and companies to hire from underserved populations, such as ex-felons, veterans, food stamp recipients, and those who haven’t secured employment for long.
The amount of Work Opportunity Credit received depends on the category of your underserved employees and the number of hours worked during the tax year. Generally, businesses can claim 40% of their employees’ $6000 first-year wages.
Credit for research activities
Small businesses can access several research and development tax credits. While businesses in the medical and technology realm mostly benefit from these credits, many other companies engage in research and development. You should apply for research and development tax credits if you have:
- Developed new models or prototypes
- Improved your quality control processes
- Improved product efficiency or efficiency of already existing business processes
- Developed a new business process
R&D tax credits subtract 10% of research and development costs incurred by the business.
Endnote
Running a small business is costly. Like other small businesses and startups, you should find ways of saving some costs. Tax credits are one sure approach to minimize business expenses. These credits can reduce your tax liability.