Small business is the backbone of the American economy and, up until recently, it has suffered from globalization and large-scale businesses with prices so low they cannot compete. However, as our economy has taken a tumble, we are, on a national level, beginning to understand again the importance of small business.
There are tons of new and not-so-new tax credits in place that all small business owners should know about, as they are a means by which to make running your business far less expensive.
There are really tons of different tax credits and other breaks out there for small businesses. What follows is just a list of some of the most useful that will provide the most savings come tax time.
Reduce Your Taxes by Insuring Your Family
Those who are self-employed must already pay full income and Social Security tax on all their earnings. They are also responsible for providing for they and their family's own health care costs. A new tax credit is designed for those who are self-employed and pay full insurance premiums for themselves and/or their family. This new tax credit allows to reduce their taxable income by the total amount paid annually in premiums.
Work Opportunity Tax Credit
Though this is not a new credit, it is important for the strengthening of communities and many may not know about it. There are many populations out there, from at-risk young adults to veterans, that cannot find jobs or face certain roadblocks to employment. These roadblocks in no way mean that these are unsuitable employees. The Work Opportunity Tax credit allows one to reduce their taxable income through the hiring of these individuals.
Spread Out Debt Cancellation Costs
Many small businesses have faced large, mounting debts in recent years and are working to get them reduced or eliminated. However, when this happens, the total dollar amount of the debt is added to one's taxable income for that year. A new Act allows for the amount in debt cancellation to be spread out of a five year period, reducing a small business's annual tax liability. The amount canceled is divided up evenly over that five year period and that amount is added to the annual income tax liability.
Tax Credits for Providing Health Insurance for Employees
There is now a full and partial tax credit for small business owners who provide insurance benefits to their employees. Whether one qualifies for a full or partial tax credit depends on the size of the business. Business owners must be paying at least 50% of their employees insurance premiums in order to qualify for this tax credit. The credit allows for up a 35% in the taxable amount of what you paid for insurance.
Tax Credits for Increasing Research Levels
One of the most important, yet also most expensive, parts of running a business is research and development of new products or services. No matter how expensive it is, it is important to improving our future and a new tax credit is designed to help promote the growth of businesses research efforts. A tax credit worth up to 20% of your expenditures is offered to businesses who are increasing their research budgets and efforts, hoping to spurn new growth and development across small business industries.
A small business is always looking for a way to reduce their taxable income or to reduce the cost of doing or opening a business, without having to scrimp on their product or services. This is why it is so important to understand the various tax credits out there that are available, waiting for one to take advantage of them. They can provide a real, significant savings for many small businesses.