If you want to save money when tax season arrives, tax credits are the best way to do so. They give you a dollar-for-dollar reduction of how much you’ll owe.
Thus, you’ll want to find the best tax credit for small business owners.
As you explore this guide, you’ll find the most common tax credits for small businesses. Each point will cover basic information about each credit like what requirements you need to meet to qualify.
Work Opportunity Credit
If you hire employees from the following underserved populations, you can qualify for a Work Opportunity Credit:
- People who receive Supplemental Security Income (SSI), food stamps, or family assistance
Your credit size depends on the type of employee category you hire from. For instance, you can get higher tax credits for employing individuals receiving family assistance or veterans. Otherwise, you can claim a credit for 40% of the employee’s first $6,000 of their first-year wages.
Small Employer Health Insurance Premiums Credit
Unless your business is tax-exempt, you can get a tax credit worth 50% of what you paid toward health insurance premiums. Thus, if you provide health insurance plans, you can save a lot of money.
First, you have to have fewer than 25 full-time employees and pay at least half of your employees’ health insurance. Then, you will have to pay less than an average wage of $51,600 per year and buy your insurance plans through the Small Business Health Options Marketplace.
Credit for Increasing Research Activities
As a small business, you can subtract up to 10% of your research and development (R&D) costs from your taxes if you were to develop new prototypes or make other improvements to your business through research.
Your business must be a partnership, sole proprietorship, or a non-publicly traded corporation to qualify for the R&D credit.
Electric Vehicle Credits
If you produce or use alternative fuels for machinery or vehicles, you can claim tax credits that have varying values based on the credit you claim. This also applies to whether you use an electric vehicle for your business.
Some examples of small-business tax credits that you can get include:
- Qualified Electric Vehicle
- Investment Credit
- Biofuel Producer
- Alternative Fuel Vehicle Refueling
- Biodiesel and Renewable Diesel Fuels
Employee Retention Credit
Keep in mind that originally, the employee retention credit was one of the easiest tax credits. But 2021 was the latest date that employers could claim this credit.
However, that doesn’t mean you’re not entirely excluded from the credit. Check out https://rebate.us/how-do-you-calculate-employee-retention-credit to learn how to calculate an employee retention credit.
What Is the Easiest Tax Credit for Small Business Owners?
Fortunately, there are plenty of opportunities to find a tax credit for small business owners. If you swap to electric vehicles, pay for health insurance, increase your research budget, or do other activities, you can save a lot on taxes.
However, whether a tax credit qualifies as the “easiest” depends on your circumstances.
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