Tax credits are much welcome, and often invaluable additions to any organization’s finances. A tax credit is the amount of money that taxpayers can subtract from their taxes. They differ from tax deductions and exemptions in that while they reduce the amount of your organization’s taxable income, tax credits reduce the actual amount that you owe the government. This guide contains some of the ways you can reduce the amount of tax that your organization pays. Some of these ways require more planning and execution than others, but they can all save your organization a lot of money in the long run.
Claim Specific Tax Credits Relevant To Your Business And Industry
Some tax credits are general to all businesses and organizations. However, some like the alcohol fuels credit are more industry specific. You should find out what tax credits apply to your specific industry, and take advantage of them. Here are five of such tax credits and their eligibility criteria:
- Alcohol Fuels Credit: This credit applies to businesses engaged in the manufacturing of fuels, and is calculated from the costs involved with the production of alcohol-based fuels. Businesses that manufacture non-alcohol-based fuels do not qualify for this credit.
- Alternate Motor Vehicle Credit: This credit is to encourage the use of alternate energy powered vehicles, and you can get up to $8,000 in credit for using cars that run on hydrogen fuel-cells
- Disabled Access Credit: Businesses that incur expenses while providing easy access to the business for disabled people can claim up to $5,000 on $10,000 of expenditure
- Rehabilitation, Energy and Reforestation Investments Credit: Organizations that invest in reforestation, building rehabilitation and alternative energy properties used in their business are eligible for up to 10% of their expenditure. This is limited to $10,000 every year.
- Small Employer Pension Plan Startup Costs Credit: This tax credit rewards small business who start a pension in their organizations. This credit is limited to $500.
If your organization is participating in innovative work, you may also qualify for some tax credits. In most countries, R&D tax credits are given to companies that are pioneering in their fields. These credits are given by the government to motivate companies to invest in Research and Development. Organizations that invest in R&D qualify for the tax credit, and can claim it by calculating their R&D expenditure and submitting the figures in their tax returns.
Register Your Business Correctly
Businesses registered as sole proprietorships are subject to different tax laws than those registered as Limited Liability Companies (LLC). Sole proprietors have to pay self-employment taxes that LLCs do not, and as a result, your organization could be paying a lot of unnecessary taxes. Registering your organization as an LLC could mean more for you in tax credit, as well as other tax benefits available to LLCs.
Maximize Your Tax Refunds
While on the subject of saving money through taxes, tax credits are not the only way you can get more back from your taxes. Simple ways to get the most refunds on your taxes include itemizing deductions like charitable contributions, unreimbursed business expenses, and casualty loses. If you’re eligible, you could also take advantage of above the line deductions. Above the line deductions are tax deductions that exclude certain expenses like education expenses from your gross income so that you’re only concerned with your adjusted gross income.
Stay Up To Date On Tax Laws
When you’re out to get as much out of your tax as you possibly can, it’s very important to stay up to date on tax laws. Countries all over the world are constantly updating their laws, making it easier for entrepreneurs and businesses to function and thrive. However, you still have to know about these tax laws if you’re going to take advantage of them. For example, in America, the new tax rate for all seven income brackets was reduced. Little bits of knowledge like this can go a long way for your tax credit.
Avoid Taxing Fees
There’s no point in getting tax credits if your organization is just going to lose them paying fees and penalties. One of the common fees people fall victim for is late filing penalties. Depending on your type of business, you could get severe penalties.
For example, C corporations can be subject to late payment penalties on unpaid tax dues, while S corporations are subject based on the number of shareholders as well as unpaid tax dues. Since the penalties can be quite costly, it helps to file your taxes on time even if you’re currently unable to pay.
Have you read?
# Digital Marketing Courses That Are Trending Globally.
# Greatest Train Journeys in Asia You Cannot Afford to miss.
# 10 Common Rules That CEOs Should Break.
# 5 Activities That Reduce Stress Level.
# Things To Keep In Mind While Buying A Laptop Bag.
Follow CEOWORLD magazine headlines on: Google News, LinkedIn, Twitter, and Facebook.
Thank you for supporting our journalism. Subscribe here.
For media queries, please contact: email@example.com