The phrase “tax credit” rings sweetly in the ears of business owners when it is mentioned. There are several types of business tax credits available, so long as your business qualifies for one, or possibly more. What if all those credits could be combined together? The General Business Tax Credit is an overarching term referring to a nonrefundable business tax credit, consisting of a plethora of assorted business credits available to qualified small businesses.
Qualified Small Businesses
In general, the qualifying small business should be a corporation (with no publicly traded stock), a partnership, or sole proprietorship whose average annual gross receipts do not exceed $50M.
Just to name a few of these credits available to qualified businesses:
- Work Opportunity Credit
- Rehabilitation Credit
- Low-Income Housing Credit
- Small Employer pension plan startup costs
- Distilled Spirits Credit
- Alternative Motor Vehicle Credit
If you only plan to claim one business credit, you only need to file the appropriate form for that credit for your business tax return, such as Form 5884 for the Work Opportunity Credit. Otherwise, you may use Form 3800 to claim the several business tax credits that you may qualify for, and attach any additionally needed forms.
Running up the credit limit
Unsurprisingly, the amount you can claim for the general business credit is limited based on your tax liability and Alternative Minimum Tax liability for the year. Excess credit may get carried into the following years though. Each credit may have its own provisions and limitations, such as the research credit.
By utilizing available business tax credits effectively, owners growing their businesses can potentially expand further and faster. Money that would be otherwise spent paying taxes can be turned around into things such as hiring new staff. Having knowledgeable tax guidance can help owners plan for using such business credits effectively, which we at MiklosCPA can do for our business clients. We have helped many small and emerging businesses with their tax and “back office” accounting needs. Give us a ring (or email) and learn more how we can help your business! Also, please follow our social media pages for additional tax tip pieces like this one as well as other useful business knowledge.