5 Tax Credits Business Owners Should Take Advantage Of

5 Tax Credits Business Owners Should Take Advantage Of

If you’re a small business owner, then you know how hard you work to maintain and grow your company. You put in long hours, pay bills out of pocket and carefully balance your business finances to ensure you’re earning the profits you need each month. Shouldn’t you be rewarded for all that hard work?

We think so too. That’s why we put together this list of tax credits that eligible small business owners can file for to reduce how much they owe in taxes or even receive rebates in some cases. Let’s dive in!

#1 Work Opportunity Tax Credit

This credit is for small business owners who hire people from specific minority groups, such as veterans, reformed criminals or older adults. The amount of tax credit you receive is based on three criteria:

  • Which category the worker falls into
  • How much the employee makes in their first year with your business
  • How many hours they worked

The amount you can also receive credits through the Secure 2.0 Act for offering retirement and health coverage to these employees. Specific guidelines and rules apply.

#2 Employee Retention Tax Credit

ERC, or the employee retention credit, is a COVID-19-specific credit that applies to businesses that were negatively impacted by the pandemic. It’s designed to help you pay your workers’ salaries so they stay with your company instead of finding other jobs.

Businesses that were partially or fully closed during the pandemic due to government restrictions during COVID can claim up to half of $10,000 in qualifying wages for each full-time employee who was on your payroll in 2020.

The maximum credit amount increases for those on your payroll in 2021. You can claim up to 70% of $10,000 in wages per quarter for full-time employees who were with your company in 2021. That’s a maximum total of $21,000 for each employee!

#3 Health Insurance Premiums Credit

As a small business owner, it can be tough to provide common benefits like paid leave for your employees. You might not feel like you have the cash flow to help your employees cover their health insurance costs. That’s where the Health Insurance Premium tax credit steps in.

This is an employer credit that allows you to recoup 50% of employer-paid health insurance premiums. There are some requirements to qualify for this credit, including:

  • A staff of less than 25 full-time employees
  • Pay an average wage of less than $55,000/year per person
  • You pay at least half of their insurance premiums

You can only claim this tax credit for two years in a row, so be sure to speak with your financial advisor to create a strategic plan for claiming it.

#4 Research and Development Credits

If your company is in the business of manufacturing new solutions or selling custom products, then you might qualify for one of many R&D tax credits. There are several such tax credits available to small businesses, so you don’t necessarily have to be in a research-heavy industry, such as the medical or technology fields, to claim one.

When you find a credit that you qualify for, you can typically credit up to 10% of your costs for activities like:

  • Developing new products or prototypes
  • Improving your businesses’ efficiency
  • Pursuing environmental certifications
  • and more

#5 Disabled Access Credit

Lastly, the Disabled Access Credit is a simple way to be rewarded for making your business accessible to all potential employees. When you upgrade your office, adhering to standards set forth in the Americans with Disabilities Act (ACA) and creating an inviting, accessible workplace, you can receive credit for up to 50% of your total costs.

The credit is offered to businesses with total revenue of up to $1 million and up to 30 full-time employees.

You work hard to make your business successful, and you should be rewarded. Take advantage of qualifying tax credits this year to ensure you get the most rewards for your efforts.