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5 Tax Credits Your Small Business Can Claim

Running a business has many financial implications, with paying tax being one of the most important. It might seem like an enormous expense for your business, but it is also one of the most effective ways to save money if you have a proper tax strategy in place. Figuring out what tax credits your small business can claim could be a game changer for your company.

A Certified Public Accountant (CPA) can help you find ways of legally reducing the amount you pay in taxes every year, oftentimes through tax credits. Tax credits define the amount of money a business is allowed to subtract from the income taxes that it owes.

Especially in times of economic turmoil, tax credits for small businesses can be crucial when it comes to looking out for your business and taking steps to improve your financial position. Here are 5 tax credits for your small business to claim this year:

1. Paid Family and Medical Leave Credit

Introduced in 2017, this is a credit designed to encourage small businesses to offer their staff paid leave, for reasons including birth of a child or a familial health emergency, under the Family and Medical Leave Act.

Business owners must have a written policy that meets IRS requirements, and they will be able to claim credit equal to the percentage of wages they pay to employees who are taking leave as a result of family or medical issues. The amount of the credit is to be calculated according to IRS guidelines. Form 8994.

2. Alternative Fuel and Motor Vehicle Credits

Fuel credits are applicable for businesses involved in the production of alternative fuels or that use alternative fuel to operate motor vehicles. This credit is designed to encourage a shift in focus away from imported oil and onto other fuels. If your business falls under this category, you can make a claim for a refund for alcohol, biodiesel, renewable diesel, or alternative fuel.

In regards to alternative motor vehicle credits, you can claim up to $8,000 toward the cost of buying an alternative fuel vehicle, such as cars that use hydrogen fuel-cell technology. Note that this credit does not include electric and hybrid vehicles, as these use conventional fuel.

The idea is to encourage drivers to consider alternative means of fuel, as this can be much better for the environment and will help the US move toward alternative fuel sources instead of imported oil.

3. Disabled Access Credit

Making your place of business fully accessible to those with disabilities might mean making a few costly changes, but it comes with plenty of upside. Not only will you accommodate an important portion of the general population, but you will also be eligible to claim a disabled access credit.

Small businesses with fewer than 30 employees or an annual revenue of >$1 million are eligible to claim up to 50% of the costs relating to disabled access within the business. This is an important incentive for many companies that work to make themselves more disabled friendly, which can have really positive implications for company culture and reputation. 

4. Empowerment Zone and Renewal Community Employment Credit

If you hire employees living in low-income areas then you could be eligible to claim this credit. Createed by the Department of Housing and Urban Development, this is a tax credit that helps stimulate and develop these areas by encouraging businesses to hire full or part-time employees who live in these empowerment zones.

Your company will be able to claim up to 20% of the first $15,000 of the wages you pay for this employee. This credit is intended to encourage businesses to diversify their staff and encourage them to hire more people from low-income areas.

5. New Markets Credit

This credit rewards businesses for getting involved in the local community, namely community development enterprises (CDEs) and community development financial institutions (CDFIs). The new markets tax credit is a great incentive for companies looking to invest in community development and helping to improve local communities. 

If your business wants to put money towards an organization that helps low-income communities, you can claim tax credits. There are some qualifications; for instance, the project you are backing must be in an area with a 20% poverty rate. Using Form 8874 will help you apply for this and help you make sure that you benefit from it as much as possible. 

These tax credits are a great way to increase your business’s savings. Review your possible tax credits every year to see what you qualify for as your eligibility will change. A CPA can help you prepare and implement a tax strategy to ensure that you are employing tax credits to help your business save as much money as legally possible on your taxes.


Want help figuring out how to maximize your business’s use of tax credits? Contact Insogna CPA today to start implementing a tax strategy unique to your business.

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