There are a plenty of business tax credits that can be utilized by small business owners in helping with their taxes. Unlike deductions that only reduce your taxable income, tax credits can directly reduce the amount that you may end up owing to the IRS..
These general business tax credits need IRS Form 3800 for “General Business Tax Credits” and need to be properly filed to claim them. Just to list a few of the interesting ones that are out there:
- Alternative Motor Vehicle Credit – owning and utilizing a qualified vehicle powered by an alternative fuel source, such as a hydrogen car can qualify for a tax credit.
- Biodiesel and Renewable Diesel Fuel Credit – producing biodiesel and other renewable fuels can also be claimed for a tax credit.
- Credit for Employer-Provided Childcare Facilities – businesses with qualified expenses related to providing childcare for employees can claim this credit.
- Credit for Increasing Research Activities – a tax credit encouraging businesses to spend more money in research-related activities, such as developing alternative fuel sources.
- Credit for Small Employer Pension Plan Startup Costs – available to small businesses for qualified costs related to establishing simplified employee pension (SEP) and Savings Incentive Matching Plans for Employees (SIMPLE). Want to find out more?
- Distilled Spirits Credit – distillers, importers of distilled spirits, and eligible wholesalers of distilled spirits can claim a credit aimed to support this industry.
- Empowerment Zone Employment Credit – available to employers who have employees and are engaged in a business in federally specified “empowerment zones”. For Southern California, certain zip codes of Los Angeles and Santa Ana are designated as empowerment zones.
- Indian Employment Credit – businesses with qualified wage and insurance expenses for qualified Native American Indians who live on or near a reservation can claim this credit.
- Work Opportunity Tax Credit – incentivizes employers to hire people from certain qualified and designated groups that tend to have higher unemployment rates, such as disabled veterans, ex-felons, and people receiving food stamps assistance.
These and other business credits have their own rules and requirements to properly claim them. There are also specific forms that must be attached to claim these credits on your Form 3800, such as Form 8845 for the Indian Employment Credit.
Interested in learning how your business can take advantage of these and other business credits? MiklosCPA is a greater Los Angeles and Orange County-area CPA firm that has knowledge and experience in helping small businesses properly prepare their taxes and utilize available tax advantages.