Tax Credits For Employers: What You Need To Know
As a business owner, taxes can quickly pile up, affecting your bottom line. Depending on your business type and size, there may be different tax credits available to you. In this article, we'll take a look at some of the most common tax credits available to employers throughout the country.
Employee Retention Tax Credit (ERTC)
The Employee Retention Credit 2022 is a tax credit that employers that keep their workers on the payroll during the COVID-19 pandemic can access as a form of relief. To be eligible, businesses must have experienced a decline in gross receipts of at least 50% when compared to the same quarter in 2019.
The credit is available for the first two quarters of 2020 and can be applied to qualified wages paid after March 12 2020 and before January 2021. The credit is worth up to 50% of eligible wages paid to each employee, with a maximum credit of $5,000 per employee.
Work Opportunity Tax Credit (WOTC)
The Work Opportunity Credit (WOTC) is a federal tax credit available to firms that hire certain types of workers. To be eligible, businesses must hire workers from one of the following groups:
- Those who receive Temporary Assistance for Needy Families (TANF)
- Those who receive Supplemental Nutrition Assistance Program (SNAP)
- Long-term unemployed individuals (those unemployed for 27 weeks or more)
- Youths ages 16 to 24 who reside in an Empowerment Zone or Rural Renewal County
The credit is worth up to $9,600 per eligible employee, depending on the number of hours they work.
Disabled Access Credit (DAC)
The Disabled Access Credit (DAC) is a tax credit available to businesses that make their facilities accessible to people with disabilities. To be eligible, businesses must incur expenses for the purpose of providing access to people with disabilities. These expenses can include things like modifications to restrooms, entrances, and exits; installing ramps; or providing Braille signage. The credit is worth up to 50% of eligible expenses up to $10,250, with a maximum credit of $5000 per year.
Small Business Health Care Tax Credit (SBHCTC)
The Small Business Health Care Tax Credit is available to small businesses and tax-exempt organisations that provide health insurance coverage to their employees. To be eligible, businesses must have fewer than 25 full-time equivalent employees and must pay at least 50% of their employees’ health insurance premiums.
This tax credit is very valuable because it can cover up to 50% of premiums paid for small business employees and 35% of premiums paid for tax-exempt organisation employees. This credit can be claimed for health insurance coverage purchased through the Small Business Health Options Program (SHOP) Marketplace.
R&D Tax Credit
The R&D Tax Credit is a tax credit available to businesses of all sizes that invest in research and development. To be eligible, businesses must have incurred expenses for activities like developing new products or services, improving existing products or services, or increasing efficiency. This credit can be worth up to 14% of eligible expenses related to research and development, making it a valuable credit for businesses that are investing in innovation.
As you can see, there are a variety of tax credits available to employers throughout the country. Depending on your business type and size, you may be eligible for one or more of these credits. Be sure to speak with your accountant or tax advisor to learn more about which credits you may be able to claim.