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6 Tax Credits To Reduce Your Business Taxes

Tax Credits for Disability Access, Research, Hiring Workers, and More


For most business owners, the term "tax credit" signifies something good, but they are not sure what the term really means, and tax credits are often confused with tax deductions.  As you will see, tax credits are better than deductions.  Also explained in this article are some of the most common tax credits that businesses can use to lower taxes.

As you read through the list, be aware that all of these credits come with limits and qualifications that you must meet in order to receive the credit.  Read carefully, and discuss possible tax credits with your tax preparer or tax advisor.

Tax credits are given to businesses and individuals as incentives for certain kinds of activities. For example, businesses can get tax credits for purchasing energy-efficient vehicles and building with "green" products. Usually a tax credit is offered for a specific time period, ending after that time has ended.

1. What's the Difference Between Tax Credits and Tax Deductions?

Tax Credits for Business Tax Savings
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Tax credits are superior, in terms of tax savings, to deductions. Tax credits are deducted from income before gross before-tax income is determined. Tax deductions are taken in the next step of the tax process, reducing the net taxable income. Read more about how both tax credits and tax deductions work.

2. NEW Research and Development Tax Credit

Tax Credit for Business Research Activities
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 Research and Development tax credits have been available for many years, but small businesses often don't realize they can qualify for these credits. The PATH Act of 2015 includes some increased incentives - in the form of tax credits - for small businesses who use the R&D (Research and Development) tax credit. 

3. Business Tax Credits and Deductions for "Going Green"

Business Tax Credits for Energy Efficiency
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Making changes to your business with equipment to make it more energy efficient or more environmentally "friendly" can benefit you through tax credits.  In addition to the tax credits, you may also be eligible for tax deductions for changes made to your business facilities. 


4. Access for Disabled Persons Tax Credit

Tax Credits for Disability Access Updates
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If you make changes to your business location to accommodate employees and customers with disabilities, you may be eligible for disabled access tax credits. Removing barriers and updating facilities serves the dual purpose of increasing access and decreasing your business taxes. 

5. Work Opportunity Tax Credit for Hiring Workers

Work Opportunity Tax Credit Explained
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The Work Opportunity Tax Credit provides incentives to employers who hire qualified veterans and others from specific targeted groups. This tax credit has been modified and extended several times. The credit was scheduled to be eliminated for 2015, but the PATH Act of December 2015 reinstated the tax credit and extended it through December 31, 2019.  

6. Alternative/Hybrid Vehicle Tax Credit

Tax Credits for Alternative-Hybrid Fueled Cars
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Individuals and businesses who buy a brand new hybrid, electric or diesel fuel vehicle can take advantage of the"Alternative Motor Vehicle Credit." This tax credit applies to new cars and trucks that are certified for the credit by the IRS.The IRS alternative motor vehicle tax credit has more information.


7. Small Business Health Care Tax Credit

New Health Care Law and Your Business
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The Patient Protection and Affordable Care Act (Obamacare) includes a tax credit to encourage small employers to offer health insurance for the first time or maintain coverage they already have. The credit is available to small businesses that pay at least half the cost of single coverage for their employees. This article, from William Perez, Tax Planning Expert, explains how to qualify. 


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