Understanding and utilizing business tax credits is crucial for small business owners looking to optimize their tax strategy in 2024. These small business tax credits, ranging from green energy incentives to employer credits and state-specific opportunities, can significantly reduce your tax liability and support your business growth. Whether you’re improving your building’s energy efficiency, hiring from targeted groups, or investing in research and development, these credits offer valuable financial benefits. Be sure to consult with your accountant to explore these options and incorporate them into your overall business tax planning.
- Green Energy Business Tax Credits – Read our full energy tax credit guide.
- For Clean Vehicles – If you buy a vehicle for your own use, you can get a clean vehicle tax credit for cars that qualify. This relates to qualified electric vehicles, fuel-cell vehicles, and others.
- For Energy Efficient Buildings – An energy efficient commercial building property (EECBP) or energy efficient commercial building retrofit property (EEBRP) which is eligible, inspected, and has correctly installed systems, may qualify a business for tax savings. But note that this a deduction rather than a credit.
- For Specific Projects – The Department of Energy (DOE) approved advanced energy projects that may result in tax credits. You must apply through the DOE to get them. There’s also reward for specific activities, such as carbon oxide sequestration, low sulfur diesel fuel production, renewable electricity, and others.
- For Building Energy Efficient Homes – Contractors use Form 8908 to summarize the energy efficient homes they’ve sold or leased.
- Employer Credits
- Work Opportunity Tax Credits (WOTC) – This federal tax credit is available to those who have hired and employed individuals from targeted groups, such as veterans, ex-felons, SNAP recipients, and others.
- Empowerment Zone Employee Credit – This federal credit is for encouraging business growth in low-income areas (or “Empowerment Zones”).
- Employer-provided childcare credits – If you offer and provide childcare to your employees, you will want to read about Form 8882.
- Employer credit for paid family and medical leave – If you offer FMLA for the tax year, read about Form 8994.
- Indian Employment – If you are an employer of American Indians, read Form 8845.
- Credit for employer differential wage payments – These credits are essentially related to “overtime” payments on form 8932.
- Credit for health insurance premiums for smaller businesses – Health insurance is costly for a small business of fewer than 25 employees. See Form 8941.
- Employee tips – If you’ve paid employer Medicare taxes or social security on tips, use Form 8846.
- Economic Development/Community Support
- Opportunity zones – Via the Tax Cuts and Jobs Act of 2017, this business tax credit rewards employers who invest in distressed areas in the US.
- New markets – This credit is for qualified investments in community development entities (CDEs). Review Form 8874.
- Rehabilitation of historic buildings – If you rehabilitate a recognized historic building, you may qualify for a historic preservation tax credit.
- Supporting Those with Disabilities
- Disabled access credit – Whether you installed a ramp on a rental property or provided audio materials for written material, you can benefit from tax incentives from qualified expenses reinforcing ADA compliance for both employees and guests. Read about it on Form 8826.
- Barrier removal – Technically, this is not a credit, but a deduction. If you remove architectural barriers for the elderly and people with disabilities, your business may qualify for this deduction.
- Research Credits
- Research and development – A somewhat thorny topic, the “R&D credit” applies to the improvement or development of products, techniques, formulas, inventions, or certain software.
- Orphan drugs – More specifically, this credit has been created to encourage pharmaceutical companies to invest in drug research for smaller groups.
- State-Specific Credits
- See our Georgia Tax Credit Guide.
The IRS has a list of more updated business tax credits here.
Naturally, small business tax credits are only one part of the overall tax strategy in the year. Finding appropriate deductions, like standard mileage for vehicles and other lesser-known tax deductions, will need to be part of the strategy as well. Be sure to bring up both during your year-end planning for your small business, as well as other strategies like pass-through entity (PTE) tax elections. Natural disaster relief may affect you, or more robust state-specific options, which is why it’s important to connect with a qualified accountant to create your plan!
