According to the IRS, your general business credit for the year consists of your carry forward of business credits from prior years plus the total of your current year business tax credits. In addition, your general business credit for the current year may be increased later by the carry back of business credits from later years. You can subtract this credit directly from your tax. To find the Form you need here.
Businesses who are located in a Local Development Finance Authority or Downtown Development Authority will get additional tax benefits but all businesses can benefit from the following items:
Alcohol fuels credit which is a credit that is calculated from the costs associated with the production of alcohol based fuels such as methanol and ethanol. This will only apply if you happen to be involved in the production of fuels, not the consumption of them.
Alternative motor vehicle credit is a credit of up to $8,000 to encourage the purchase of an alternative fuel source vehicle. This does not apply to hybrids or electric vehicles since they use conventional fuel sources. Currently the IRS only recognizes one vehicle as eligible for the credit, the Honda FCX Clarity, which uses hydrogen fuel-cell technology.
Disabled access credit is if you have expenses related to providing access to your business for people with disabilities, you could be eligible for this credit. The maximum credit available is $5,000 on $10,000 of expenditures.
Employer-provided child-care credit is a credit for businesses who directly pay the child care expenses for its employees. The credit is for 25% of expenses up to $150,000 a year.
Rehabilitation, energy, and reforestation investments credits are redits for investments in reforestation, building rehabilitation and alternative energy property used in business. The credit is generally 10% of expenditures and is limited to $10,000 per year
Qualified research expenses credit is a credit to encourage domestic research and development. The calculation of the credit can be very complex, but can also provide substantial tax savings. This definition is relatively broad but encompasses such activities as:
- Developing or applying for patents
- Developing new or improved products, processes or formulas
- Developing prototypes or models
- Environmental testing
- Certification testing
- Developing new technology
- Streamlining internal processes
- Developing or improving software technologies
- Building or improving manufacturing facilities
Small employer pension plan startup costs credit is a credit for small businesses to offset the costs of starting a pension. The credit is limited to $500.
Work opportunity and welfare-to-work expenses credit are credits available to businesses that hire employees who have traditionally faced significant barriers to employment. Some barriers, such as lack of transportation, are temporary and easier to address than others like education, child-care or disabilities. The credits are calculated based on wages paid to the employees and can provide up to a $9,000 savings over two years.
Beyond business tax credits there is no shortage of potential tax deductions, so the point is to take the time to implement a tax plan and strategy to make the most out of your small business. These are general tips and should never take the place of personalized advice from a tax accountant or CPA.