The Internal Revenue Code is littered with tax credits available to taxpayers, both individuals and businesses. A tax credit is a dollar-for-dollar reduction of tax rather than a deduction. The following summarizes some of the most used Business Federal tax credits available. Additional detailed qualifications should be researched to see if your business might qualify.
Work Opportunity Credit (WOTC)
- A tax credit for hiring individuals from targeted groups, varying based on the targeted group hired.
- Provides a credit while reducing the wage deduction.
Credit for FICA on Tips
- Based on tips (on and off premises) exceeding minimum wage provisions.
Family and Medical Leave Credit
- Available if employers offer at least 2 weeks of family and medical leave with pay.
- Credit amount ranges from 12.5% to 25% of paid leave.
Credit for Small Employer Health Insurance Premiums
- Small employers who pay at least 50% of employee premiums may qualify.
- Full credit is available for those with 10 or fewer employees and specific wage limits.
5 Retirement Plan Credits for Small Employers (many of these are new with Secure 2.0 Act)
- A small employer has no more than 100 employees, and each employee earns at least $5,000.
- Plan Start Up Credit
- Auto-Enrollment Credit
- Contribution Credit
- Military Spouse Credit
- Military Spouse Contribution Credit
Clean Vehicle Credits
- Up to $7,500 credit for new electric vehicles or fuel cell electric vehicles.
- Credit for used clean vehicles is 30% of the sale price, up to $4,000.
Alternative Fuel Refueling Property Credit
- 30% credit for property used for alternative fuel storage, dispensing, or electric vehicle recharging.
New Energy Efficient Home Credit
- Credit for contractors building energy-efficient single-family and multi-family homes meeting energy standards
Research Credit
- Provides a 20% credit for increased and qualified research activities.
General Business Credits
- Disabled Access Credit
- Rehabilitation Credit
- Foreign Tax Credit
- Various other Tax Credits available for specific industries
Minimum Tax Credit
- Available for pass-through entity owners who paid AMT in previous years.
Transferability of Certain Renewable Energy Credits
- Allows businesses to sell renewable energy credits to unrelated parties.
- Transfers must include both base and bonus credit amounts.
- The election to transfer a credit is irreversible.
- All consideration paid by the transferee must be in cash.
- The risk of recapture lies with the transferee.
These business tax credits can help businesses reduce their tax liability and promote specific activities, such as hiring targeted individuals or investing in renewable energy. If you would like to discuss these credits further or have questions to see if your business may qualify, please contact your tax advisor for more information.
