It’s tax time again. And whether your’re taking the DIY route or working with a tax professional, you want to get every tax break available to you. To help you get started, here’s a review of some tax credits small business often owners miss.
No. 1. Work Opportunity Tax Credit for Hiring Veterans
The Protecting Americans from Tax Hikes (PATH) Act of 2015 authorized tax credits for businesses that hire unemployed U.S. veterans. To qualify, the veteran(s) you hire must have served on active duty in the U.S. military for at least 180 days, and not have been on active duty for a period of more than 90 days in the 60 days prior to the hiring date. Other criteria also apply. However, most veterans who’ve been unemployed for a period of at least 4 weeks in the year prior to your hiring them will fall into this group.
The amount of the Work Opportunity Tax Credit for hiring veterans varies. The maximum tax credit is $9,600, which is available to businesses who hire veterans with a service-related disability who have been unemployed for a minimum of six months. The maximum allowable tax credit for other veterans ranges from $2,400 to $5,600. The employee must work at least 120 hours for your business to be eligible.
No. 2. Work Opportunity Tax Credit for Other Groups
In addition to authorizing tax credits for businesses that hire veterans, the PATH Act identified other “target” groups. These include people who live in certain rural areas and defined low-employment zones, and the long-term unemployed. Convicted felons and people whose family have received benefits from the U.S. Supplemental Nutritional Assistance Program (SNAP) or Temporary Assistance for Needy Families (TANF) may also be eligible. The Department of Labor provides this checklist to help you determine if any of your employees fall into the identified groups.
No. 3 Small-Business Health Care Tax Credit
Your business may qualify for this tax credit if you have fewer than 25 employees who earn an average of less that $50,000 per year. You must pay at least 50 percent of the cost of your employees health care premiums for a qualified health plan purchased on the Small Business Health Options Program (SHOP Marketplace) established by the Affordable Care Act.
No. 4. Small Employer Pension Plan Startup Tax Credit
This tax credit is available to small businesses who establish a new SEP, simple IRA or other qualified tax plan. To be eligible, you must employ no more than 100 employees who received no less than $5,000 in compensation during the years for which you claim the credit. The amount of the tax credit is 50 percent of your ordinary and necessary start-up costs, up to a maximum of $500 per year. You may claim the credit for up to three years.
No. 5. Disabled Access Credit
This credit is available to small business owners who made modifications to the business premises to accommodate a disabled employee. To be eligible you must have fewer than 30 employees and less than $1 million in earnings for the year.
Thinking Ahead to Next Year
Even if you can’t claim any of the listed tax credits for 2016, the time to start planning for next tax season is now. Although tax laws are in a state of flux right now, it may be worth your while to work with a tax professional to identify hiring practices that may give you access to additional tax credits next year. What’s more, a tax professional may be able to find additional incentives that you can take advantage of right now.
At The Carmoon Group, we believe that partnering with professional advisers is an essential part of a strong business plan. That’s why we offer a consultation with a risk management specialist at no cost to you. So give us a call to make an appointment for your insurance review today. Or contact us online and we’ll get back to you right away.