A Small Business Guide to Tax Credits

Mar 13, 2012

Running a small business is challenging, and keeping up with the ever-changing tax policies can add to the list of things owners don’t have time to think about. As April 15 quickly approaches, FOX Business created a guide to tax credits specifically designed for small businesses.

Health Care Tax Credits

Small businesses can claim tax credits for providing health insurance coverage to their employees. Businesses can deduct up to 35% of employee premium costs, and that rate will increase to 50% by 2014. Small businesses that wish to claim this credit must cover a minimum of 50% of the cost of single health care coverage to employees, and must have fewer than 25 full-time employees with average wages of less than $50,000 a year. Self-employed individuals can deduct 100% of insurance costs for themselves and their families.

Retirement Plan Tax Credits

Small businesses can claim credits for starting a retirement plan for employees, including simple employee pension (SEP) plans, SIMPLE plans, and Qualified plans, such as a 401(k). Each plan comes with its own set of rules and tax rates, which is outlined in detail on the IRS Publication 560. To qualify, a small business must have fewer than 100 employees.

5-Year Carryback of General Business Credits

The Small Business Jobs Act offers opportunities for small businesses to increase their refunds by allowing them to apply their tax credits back as long as five years. This is particularly helpful during tough times because it allows businesses to offset losses against a profit from previous years.

General Business Credit Not Subject To Alternative Minimum Tax

General business credits apply to businesses of all sizes, and cover a wide range of available credits. The alternative minimum tax is an added tax intended to prevent individuals and businesses from exploiting tax breaks. The Small Business Jobs Act now allows small businesses to apply the general business credit to the alternative minimum tax liability.

Click here to read the full tax guide. 

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