An Explanation of Various Business-Related U.S. Tax Credits

Businesses in the United States can benefit from tax credits, which are designed to help with cash flow and reduce tax liability. Tax credits are different from tax deductions in that they directly reduce the amount of taxes owed on a dollar-for-dollar basis. There are several tax credits available for businesses, each with its specific criteria and requirements. We shall explore here some of these tax credits so that you can understand how your business may be able to take advantage of them.

Employee Retention Tax Credit

The employee retention tax credit is available for businesses whose operations have been fully or partially suspended as a result of COVID-19, and it helps employers retain their employees. The tax credit amount is equal to 50% of qualified wages paid between March 13, 2020, and December 31, 2021, up to a maximum of $5,000 per employee.  To be eligible for this tax credit, an employer’s gross receipts must have declined by more than 20% in a calendar quarter compared to the same quarter in 2019.

It is not too late to claim this tax credit and businesses that act now can have the assistance that is still needed to ride these difficult and unprecedented economic times. As the cost of living rises, households are having to consider more seriously what they buy, which is impacting many retail and hospitality businesses. Any support out there that can be claimed is therefore vital to help with survival and the retention of staff who we need to earn so that they spend and invest to drive the economy.

The Research & Development Tax Credit

The Research & Development tax credit is available to businesses that are developing new technologies, products, processes, and software. To be eligible for this tax credit, the business must have spent money on research activities and/or the development of new technologies or products during the tax year.

Work Opportunity Tax Credit

Another tax credit available to businesses is the Work Opportunity tax credit. This tax credit is available to businesses that hire new employees who are classified as “at-risk”, such as veterans, members of certain tax-exempt organizations, and those receiving certain types of public assistance. The amount of the tax credit depends on the wages paid to the employee during their first year of employment.

Renewable Energy Tax Credit

The Renewable Energy tax credit is available to businesses that purchase, construct, or produce certain types of renewable energy properties. This tax credit can be used to offset the cost of purchasing or constructing solar, wind, geothermal, fuel cell, and other renewable energy systems. The amount of the tax credit varies depending on the type of system purchased or constructed.

Any business that supports the environment is a friend of the government of the day that will be required to meet targets concerning pollution and lessening or attempting to reduce the effects of the global warming crisis. This is why tax credits are being awarded to those businesses that support the cause.

Small Business Health Care Tax Credit

The Small Business Health Care tax credit is available to small businesses that provide health insurance coverage to their employees. The tax credit is equal to a percentage of the business’s total contribution towards its employee’s health insurance premiums. To be eligible for this tax credit, the business must have fewer than 25 full-time equivalent employees and have average wages of less than $52,000 per year.

This is just a brief overview of some tax credits available to businesses in the United States. To learn more about the tax credits your business may be eligible for, please consult with a tax professional. They can help you understand which tax credits are available to you and how you can best take advantage of them. By taking the time to research tax credits, you can save your business money and help ensure that it complies with tax laws.