A Closer Look at Tax Credit Opportunities for Small Businesses

December 5, 2023
Dayes Law Firm

Is your small business taking advantage of all the tax credits you’re eligible for? If not, you’re probably paying more taxes than necessary. 

Tax credits are dollar-for-dollar amounts you can claim on your tax return to reduce the amount of tax you owe. The IRS offers several small business tax credits to save money come tax season. 

Types of Tax Credits

Small business tax credits can reduce the income you must pay taxes on, saving you money. They’re available to businesses that meet specific criteria and generally incentivize businesses to make positive economic and environmental choices. 

Below are some of the common small business tax credits you may be eligible for: 

  • Research and development (R&D) tax credits: R&D tax credits are available to businesses that invest in the research and development of new processes, products, or services. 
  • Work opportunity tax credits: These credits are available to businesses employing individuals in certain target groups, such as people with disabilities, veterans, ex-felons, and people who have been unemployed long-term. 
  • Small business healthcare tax credits: These credits are available to small employers offering qualified health plans to employees and pay at least 50% of the cost of employee-only healthcare coverage. They can provide credits equal to up to 50% of premiums paid. 
  • Employee Retention Tax Credit (ERTC): The ERTC is available to businesses that experienced financial hardship during the pandemic. It can provide a credit for qualified wages paid to employees in 2020 and 2021. ERTC eligibility requirements vary, so talk to a professional about your eligibility. 
  • Energy tax credits: These credits are available to small businesses that use energy-efficient equipment or invest in renewable energy technologies. 
  • Other tax credits: Many other tax credits are available to small businesses at the state and local levels.

Benefits of Tax Credits for Small Businesses

Applying for tax credits may seem like a hassle, but it can provide significant benefits for your small business. Claiming all applicable tax credits on your tax return can: 

  • Reduce the amount of taxes your small business owes, protecting your capital.
  • Free up cash flow you can reinvest into your business, use to hire new employees, pour into operation expansions, or use to achieve any other economic goals.
  • Help your business compete with larger or more established companies in your area by reducing the costs of doing business.

Even better, claiming tax credits doesn’t need to be time-consuming or challenging. Working with a tax professional can streamline and simplify this process. 

How to Find the Tax Credits You Are Eligible For 

You must ensure your eligibility for a tax credit before claiming it. Otherwise, you risk facing penalties that end up costing you more than you would have saved with your credit. 

Start by visiting the IRS website for free ERTC resources to learn more information about the tax credits above. The IRS lays out eligibility criteria and application processes. 

You should also consult a tax professional before claiming tax credits. A CPA or tax attorney can detail which credits you are eligible for and walk you through the process to claim them. 

Contact Dayes Law Firm for Tax Credit Assistance

Small business tax credits are essentially free money for your business, and you shouldn’t overlook them in your tax planning strategy.

If you’re unsure whether you are eligible to claim the ERTC or other tax credits, or if you need help filling out the ERTC tax credit form, Dayes Law Firm is here to help. Give us a call at (800) 503-2000 or fill out our online form to schedule your free consultation.