Consulting Services for Business Incentives and Tax Credits
Numerous business incentives and tax credits are available to Texas small business owners, and with expert tax consulting services, they can be leveraged for maximum tax savings.
Tax advisory services can provide insights and an optimal tax strategy for businesses and assist with filing out the relevant tax forms. That adds up to major time and tax savings for owners.
Here, we’ll address some of the most common business incentives and tax credits, along with their benefits and qualifications.
The General Business Tax Credit - Form 3800
The General Business Tax Credit is actually a combination of all the tax incentives and credits that the business is claiming for the tax year. If the business is taking more than one tax credit or incentive, they will all need to be claimed using Form 3800, which is essentially a long list of all the tax credits and incentives available to businesses. A tax consulting expert can assist with this.
The Work Opportunity Tax Credit - Form 5884
The Work Opportunity Tax Credit is available to businesses that hire employees from one of several groups of people who face obstacles to employment. These groups include:
- Qualified long-term unemployment and Temporary Assistance for Needy Families (TANF) recipients
- Unemployed and disabled veterans
- Ex-felons
- Food Stamp (SNAP), Supplemental Security Income (SSI) or long-term family assistance recipients
- Certain residents living in Empowerment Zones or Rural Renewal areas
Employers are eligible for up to a $6,000 credit per employee, and the exact tax benefit is based on the wages the employee receives.
Tax Incentives for Research and Development
Companies may deduct a portion of their research and development costs, though strict qualifications apply. Specifically, only certain types of research apply and only a portion of the R&D expenses can be deducted. Form 6765 and Form 8974 can both be used to apply a research-related tax credit on the company’s federal taxes. In Texas, qualified R&D costs can be applied to the business’s franchise taxes or sales taxes to reduce the company’s overall tax burden.
Tax Incentives for Investing in a Texas Empowerment Zone
Empowerment Zones are economically distressed areas that provide tax benefits to any businesses that invest in the community. To qualify for the benefit, businesses must invest a minimum of $40,000 in a designated Empowerment Zone and provide a minimum number of jobs (at least 250) to people living in the community.
Empowerment Zone tax benefits are also scaled to the qualifying employee’s wages, and in Texas, they can be deducted from the company’s sales or use taxes.
Federal benefits are also available to companies that invest in Empowerment Zones, which are accessed through Form 8844.
Small Employer Tax Incentives for Establishing a Pension Plan or for Health Plan Premiums
Small employers may deduct a portion of the health plan premiums they pay for their employees, assuming a few qualifications are met. Specifically, the company must employ 25 or fewer full-time employees who have an average wage of $66,600 or less. Also, companies must pay at least half of the total cost of their employees’ health plan premiums. Claimed through Form 8941, this tax benefit can provide a credit worth up to 50 percent of the paid premiums.
Small business owners can also claim a tax credit if they start up a pension plan and incur the resulting costs. To qualify, the business must not have had a 401(k) retirement plan for the previous three years, and it must employ fewer than 100 people. This credit is worth 50 percent of the pension plan’s startup costs – up to $500.
The Employer-provided Child Care Tax Credit - Form 8882
The Employer-provided Child Care Tax Credit is eligible to employers who pay for their employees’ childcare. This benefit is equal to 25 percent of qualifying childcare costs, up to $150,000. Form 8882 is used to claim the Employer-provided Child Care Tax Credit.
Tax Credits for Rehabilitating a Certified Historic Structure - Form 3468
Business owners may access a tax credit for rehabilitating and maintaining an interest in certified historic structures. The building and rehabilitation project must both be certified by the state to qualify for the tax benefit. Further, the company must maintain an ownership interest in the building for the first year it is put back into service following rehabilitation. The project’s cost must exceed $5,000 to qualify, as well.
Texas Business Owners Can Also Leverage Various Tax Exemptions
Texas stands out for the number of tax exemptions available to business owners. A tax consulting expert can help companies identify which exemptions they qualify for, most of which concern state sales and use taxes. These exemptions include:
- Franchise tax exemption
- Property tax exemption
- Equipment sales tax exemption
- Medical or biomedical property tax exemption
- Wind and solar energy tax exemption
There are more exemptions available, so check with your tax consulting expert before organizing your business tax return.
A Tax Consulting Professional Can Optimize Your Business Tax Incentives and Credits
Business tax planning is complicated – starting with all the ways companies can optimize their tax savings. With hundreds of potential tax deductions, tax credits, tax exemptions and other tax benefits to claim, small business owners may be overwhelmed when devising an optimal tax strategy.
A tax consulting service can assist business owners with this part of the tax planning process, with a long-range approach that’s customized to your company’s operations.
