As a small business owner, you play a major role in keeping the economy stable and keeping the population employed. While all businesses have an obligation to pay state taxes, federal taxes, or both, you can lower your tax obligations if you take the time to learn about the tax breaks that small businesses qualify for. The government has created a number of different business tax credits that can reignite the economy by reducing the cost of doing business. Here are 5 of the tax breaks that can benefit you so that more of your revenues can be considered profits:
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1. Health Care Tax Credit
If you have 25 or fewer employees and the average salary between all of your employees is less than $50,000, you may qualify for a tax credit by offering to pay for half of your employees’ health insurance premiums. This is part of the Affordable Care Act that was passed in 2010, and can help you retain your valuable employees by offering medical benefits and getting an incentive for offering these benefits.
2. Bonus Deductions for Depreciation
Business vehicles, commercial machinery, business property, computer equipment, furnishings, and fixtures all depreciate in value each year. In 2008, the Economic Stimulus Act was passed to allow business owners to write off up 50% of the depreciation costs of the items used in conjunction with doing business.
3. Limited the Penalties on Errors
If you trust ADP services, you do not have to worry about payroll tax reporting errors, but filing your own taxes can lead to expensive mistakes. Now, the government limits the penalties for making errors on taxes with the Small Business Jobs Act by requiring the taxpayer to pay only 75% of the penalty. This means that an error will not necessarily cost $200,000, like it would have in the past.
4. Start up Deductions
Start-ups that are successful create jobs, and because employment rates benefit from start-ups, owners can deduct $10,000 of the expenses to start a new small business. The amount was $5000 in the past, but the $10,000 break was set in place by Obama and is a permanent limit written into the Small Business Jobs Act.
5. Simple Cell Phone Deductions
Deducting the cost of cell phone expenses associated with business operations was difficult in the past, but the Small Business Jobs Act makes taking advantage of the deduction much easier for SBA’s. Now, there is no record keeping requirement to get the deductions you deserve.
There are so many tax breaks for small business owners, and knowing which incentives you may be able to take advantage of is important before you file. Make sure to work with an expert in taxes, maximize your tax credits, and you can maximize the profits.