The Governor of Florida recently signed a tax cut package to provide over $168 million in savings for businesses and families. However, Florida’s tax-friendly nature doesn’t mean that businesses all over America enjoy the same benefits.
In fact, many business owners turn towards tax credits to cut their tax bills. However, not everyone is clear on what a tax credit is and how it is different from a tax deduction, so let’s clear that up first.
Tax Deductions vs. Tax Credits
Tax credits are essentially incentives for businesses for certain specific activities. For instance, if a business purchases an energy-efficient vehicle, it can get tax credits. Tax credits are typically available for a certain period.
Tax credits are superior to tax deductions because they are deducted from the income is even determined. Tax deductions are considered in the next step to reduce the net taxable income. So, what are some tax credits that your business can leverage to cut the business tax bill? Let’s have a look.
1. Small Business Health Care Tax Credit
The small employer health insurance tax credit is a part of the Affordable Care Act to encourage small employers to provide health insurance. The credit can be claimed by small businesses that pay at least 50% of the cost of single coverage for their employees.
Businesses who meet the qualifications can get a tax credit of as much as 50% of the health insurance premiums paid for the employees. However, the tax credit is only for businesses having fewer than 25 full-time employees with an average wage of under $54,000 to qualify.
2. Research and Development Tax Credit
Although Research and Development tax credit has been around for years, many small businesses don’t know if they qualify for it. Since the credit is for increasing research activities but it doesn’t scientific research.
Therefore, businesses involved in product development, studies or surveys, improving product quality or reliability, function or improving business performance.
3. Tax Credits and Deductions for ‘Going Green’
Making your business more energy-efficient or more environmentally friendly can also benefit you through tax credits. Moreover, you may also be eligible for tax deductions if you make changes to your business facilities.
Although there are certain quality and performance standards, your business will need to own equipment to qualify.
In short, these are just some of the many tax credits available for small and large businesses. If you want to learn more about tax credits and deductions, it’s important to reach out to the experts.
At Advance Tax Defense and Accounting, we offer comprehensive tax services including small business tax preparation and planning, IRS tax problems, and other services in West Palm Beach. Get in touch with us now to learn more about how we can help you.