When you run your own small business it is important to know about all of the different tax credits available to small businesses. Entrepreneurs who take the leap and open their own business take on a host of different risks. While some of these risks can be mitigated, protecting a business from a potential loss costs money and the protections are never full-proof. To encourage tax-payers to look past the costs and risks associated with running your own business, the Internal Tax Revenue service offers business owners with tax credits that lower their tax obligations, according to BizFilings. Here are some of these credits you should be aware of before next tax season:
Retirement Plan Setup Credits
One of the drawbacks of being a business owner and that you do not have an employer to offer you retirement plans or retirement matching. Since it is your job to start your own retirement accounts, you can take advantage of the Retirement Plan Setup Credit. The purpose of this credit is to help stimulate retirement savings among smaller employers who may not have offered retirement options otherwise but who decide to establish new plans.
To qualify for this credit you need to have 100 employees or less and who have not offered retirement plans in prior years. The credit equates to half of the costs incurred to establish a new plan up to $1000 per year.
Energy Credits for Using Alternative Energy Sources
The government offers businesses that are reducing their carbon footprint credits when they invest in equipment that is needed to use alternative sources of energy. You can write off up to 10 percent of the cost to buy new energy equipment that will help you convert alternative and sustainable types of fuel to energy that will generate electricity, provide you with hot water or product heat. The equipment that you purchase must be used in conjunction with your business.
Small Business Health Care Credits
There are also benefits to offering your full-time employees health insurance. If you have less than 25 full-time employees and you pay half of their insurance premiums or more you will receive a sizable tax credit. The maximum credit that you can receive is 50% of the premium expenses, but this credit can only be claimed for two years consecutively. Just be sure that you check into the rules and you do not count family members as employees, because they are excluded.
Auto-related Expenses Can Be Deducted
You can lower your tax bill by claiming expenses related to your autos as long as they are used in business, according to TurboTax. Driving down your tax obligations is possible by claiming your mileage as a deduction on a per-mile basis. The currently deduction is 57.5 cents for each business mile that you drive when you use standard mileage rates. You may also be able to write off 100 percent of your actual expenses for gas, oil, registration, insurance, lease payments, toll fees, parking fees and depreciation.
Related Resource: Employee Insurance Plans
These are just some of the most common credits and deductions that you can take advantage of when you are a business owner. It is important to keep good records and to have a general understanding of the credits that are available. Be sure to hire a reputable tax professional to help you get the tax credits available to small businesses that you are eligible for.
