Every small or large business owner wants to save money from taxes and thus tries to use various provisions of tax deductions and credits. However, some tax credit options are available for businesses, but they need to be made aware of such tax credits. So, in this article, we will discuss some commonly missed tax credits by business owners.
If you are in Cape Coral, you must also consider consulting an expert accountant who can help you with the tax credits. There are various accountants for tax preparation in Cape Coral, FL so that you can get help from them for better taxing strategies.
Understanding the Difference Between Tax Credits and Tax Deductions
There is often a huge confusion among people about tax credits and tax deductions. If you are a business owner, you must know the difference between the two terms, as there are instances in which businesses merely focus on deductions and avoid claiming credits. Let’s understand the difference between these two terms.
Tax deductions reduce the taxable income and put you in a lower tax bracket, which is a very beneficial state for business owners. Additionally, there are tax credits that reduce the amount of tax owed by giving a dollar-for-dollar reduction of the liability.
What are Tax Credits that the Business Owners Commonly miss?
- Work Opportunity Tax Credit (WOTC): This is one of the important tax credits because it is claimed by the companies who spend their money on hiring individuals who are facing employment barriers. So, in this case, if there is any hiring that otherwise would have led to unemployment, you will get dollar-for-dollar tax credits. For instance, if you are providing temporary assistance to needy families, ex-felons who are hired one year before the conviction date, veterans, and other people. So, you can get a tax credit benefit over these expenses.
- R&D Tax Credit: It is also one of the common tax credits for businesses because the government always wants to promote research and development in the industries. So, there are tax credits to encourage the business into such activities. This credit is available for companies of all sizes, such as software development, architectural designs, and many more.
- Natural Disaster Tax Relief: When there is any natural disaster and if the businesses suffer from the natural disaster in the affected areas, then there will be tax credits for such losses. There might be various natural disasters like winter storms, flooding, hurricanes, seawater intrusion, tornadoes, and other such disasters that come under tax benefits. It is important to prove that your area was affected by the catastrophe then you will get benefits for tax filings, payment deadlines, and other tax reliefs.
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