To stay competitive in the current business landscape, companies must take advantage of all the tax incentives available. This includes taking advantage of credits, deductions, and other opportunities offered at the state and federal levels. Businesses can reduce their tax liability and improve their bottom line by doing so. There are various tax incentives available to companies, and the specifics will vary depending on the location and type of business. However, six common examples include:
1. Capital Allowance
Capital allowance is a tax incentive that businesses can leverage to reduce their taxable income. The incentive allows businesses to deduct certain expenses related to acquiring or improving capital assets. This includes expenditures such as new machinery, buildings, or vehicles.
Capital allowance can be a valuable tool for businesses investing in new equipment or expanding their operations. However, getting a capital allowance can be tricky as you must select the property that can give you a tax benefit. Hence, it is best to seek help from a professional company for capital allowance for businesses. Such companies have expert tax advisors who can analyze and determine assets that can help get you tax benefits. They can also advise and offer help throughout the claim process to ensure you get the benefits without any hassle.
2. Work Opportunity Tax Credit
One such incentive is the Work Opportunity Tax Credit (WOTC), available to businesses that hire certain groups of individuals who face significant barriers to employment. To be eligible for the credit, companies must first obtain certification from their state’s workforce agency.
Once certified, businesses can claim a credit of up to $9,600 per eligible employee, depending on the employee’s wages and hours worked. The WOTC is just one of many tax incentives businesses can take advantage of to reduce their tax liability. Other incentives include:
- The research and development tax credit.
- The low-income housing tax credit.
- The New Markets Tax Credit.
3. Energy-Efficient Commercial Buildings Deduction
The Energy-Efficient Commercial Buildings Deduction is a tax benefit introduced to promote the construction of energy-efficient buildings. It provides a $1.80 deduction for every square foot of commercial property that is 20% more energy-efficient than a standard building. The building must be located in the United States and used for business purposes to qualify.
The deduction can be used for new construction and renovations, and it is available for various building types, including office buildings, retail stores, warehouses, and hotels. In addition to the financial benefits, energy-efficient buildings can also help to reduce greenhouse gas emissions and save money on energy costs.
4. New Jobs Tax Credit
As businesses look for ways to save money, they should consider taking advantage of tax incentives like the New Jobs Tax Credit. This credit is available to companies that create new full-time jobs and can result in significant savings. To qualify, companies must meet certain criteria, including creating at least four new full-time jobs and investing at least $50,000 in new property or equipment.
The credit is equal to five percent of the increase in payroll costs associated with the new jobs, up to a maximum of $500 per job. While the New Jobs Tax Credit is just one example, there are various other incentives that businesses can take advantage of to save money on taxes.
5. Alternative Minimum Tax Credit
Many businesses are unaware of the various tax incentives available to them. One such incentive is the Alternative Minimum Tax Credit, which can offset the cost of certain business expenses. Businesses must first meet some criteria, including having a turnover of less than $5 million per year, to qualify for the credit.
However, businesses that qualify can use the credit to offset the cost of items such as research and development, training and employee development, and capital expenditure. With the right tax planning, businesses can leverage these incentives to reduce their tax bill and free up cash flow to reinvest in their business.
6. Small Business Health Care Tax Credit
Small Business Health Care Tax Credit is available to businesses that provide health insurance to their employees. To qualify, your business must have fewer than 25 full-time equivalent employees and contribute at least 50% of the premium cost for each employee.
The credit is available for for-profit and nonprofit businesses and can be applied to medical, dental, and long-term care insurance premiums if you’re looking for ways to reduce your business’s tax liability, talk to your accountant about whether the Small Business Health Care Tax Credit could save your business money.
There are several tax incentives that businesses can take advantage of to save money. By working with a tax expert, companies can ensure that they take advantage of all available incentives and maximize their savings. Incentives like the Energy-Efficient Commercial Buildings Deduction and the New Jobs Tax Credit can result in significant business savings.