Local, State and Federal Tax Credits/Incentives
ANSWERS TO YOUR CASH FLOW
Could you be leaving money with the Federal, State, and/or Local government? The answer is probably “YES”. Many businesses are eligible for tax credits and incentives for various reasons, including: 1) the way they do business, 2) their location, 3) their employees, or 4) the growth of the business. The credits may be as small as $250 for the insurance costs they incur for their employees or as large as thousands of dollars that could cover 100% of their tax liability, including their withholding tax for Georgia if they have no income tax. Don’t leave that money on the table! Review the information below to see a partial list of the ways SME can help you keep your money and improve your business’s cash flow.
Incentives such as tax credits and property tax abatements are tools used by Federal, states and local governments to attract or retain jobs and investments, stimulate innovation, and conserve energy. While deductions reduce your amount of taxable income, credits cut your actual tax bill, dollar-for-dollar. Tax credits are an excellent way to minimize your tax liability and increase your cash flow. In other words, a $1,000 tax credit reduces your tax liability by $1,000. A tax deduction of $1,000 will reduce your tax liability by your tax rate or $350 at a 35% tax rate. Some tax credits may be refundable or offset withholding taxes if your tax liability is zero.
Below is a summary of some of the credits available.
FEDERAL TAX CREDITS:
Federal tax credits for Energy efficiency- Individuals
For 2011, tax credits are now available for energy-saving home improvements: For most improvements, the tax credit is 10% of the cost, up to $500. Note: The recent 2010 Tax Credit expired on December 31, 2010, for 30% of the cost up to $1,500.
Solar water heaters, solar panels, and geothermal heat pumps are eligible for a 30% tax credit for labor and material cost with NO cap on the credit.
The tax credit only applies to energy improvements installed after January 1, 2011. You may be eligible for a credit on a prior year’s return. In 2011 the credit only applies if you have not received more than $500 in credits since 2006. And you cannot exceed $500 in aggregate credits since 2006.
The tax credits expire December 31, 2016, for renewable energy sources and December 31, 2011 for all other energy-efficiency improvements.
Energy tax credits allow businesses deductions for new or renovated buildings that save 50% or more of projected annual energy costs for heating, cooling, and lighting compared to model national standards, and partial deductions for efficiency improvements to individual lighting, HVAC and water heating, or envelope systems.
In general, credits are available for eligible systems placed in service on or before December 31, 2016.
Work Opportunity tax credits provide tax credit to firms, including qualified “tax-exempt” organizations, who hire qualified veterans after November 21, 2011, and before January 1, 2013, to claim a credit from $2,400 to $9,600.
The expanded Work Opportunity Tax Credit allows “tax-exempt” employers who hire qualified veterans after November 21, 2011, and before January 1, 2013, to claim a credit against Social Security taxes that the tax-exempt employer would otherwise have to pay on all of its employees.
Work Opportunity tax credits provide subsidies to firms that hire targeted groups. Work Opportunity tax credits target disadvantaged workers, welfare recipients, food stamp recipients, people with disabilities, and others. The Welfare-to-Work tax credit offers firms potentially large subsidies for hiring long-term welfare recipients. When the requirements are met the tax credit can be $2,400 per hire up to $9,000 (over two years) per hire.
All Work Opportunity tax credits are time sensitive. You have a very short window of opportunity to apply for the credit. If the requirements are not met, the credit is lost forever.
This credit terminated 12-31-2011. Every year since inception, these credits have been approved retroactive, so keep this in mind and continue to collect the forms needed just in case.
Empowerment Zone tax credit provides tax incentives to companies located within these designated areas that hire individuals who both live and work in these communities. The Empowerment Zone Tax Credit is equal to 20% of the first $15,000 in wages in any year if the employee lives and provides services in an Empowerment Zone. This credit expires 12-31-11.
Disabled access credit provides small businesses with a credit to cover the cost of making their businesses accessible. The business may qualify for up to $5,000 in tax credits.
Architectural and transportation tax deduction provides businesses with an annual deduction of up to $15,000 for expenses incurred to remove physical, structural, and transportation barriers.
New Hire retention credit provides a credit for the lesser of $1,000 or 6.2 percent of wages paid by the employer to the retained qualified employee for a 52 consecutive week period. A “qualified employee” is an employee who begins employment with you after February 3, 2010, and before January 1, 2011 that certified that he or she has not been employed for more than 40 hours during the 60-day period ending on the date the employee begins employment with you. The qualified employee’s wages for such employment during the last 26 weeks must equal at least 80% of wages for the first 26 weeks.
GEORGIA TAX CREDITS:
Opportunity Zone tax credits provides (1) a Job Tax Credit of $3,500 per job created, (2) has the lowest job creation threshold of any job tax credit program (two jobs), (3) use of the credit against 100 percent of income tax liability and Withholding, and (4) expands the definition of “business enterprise” to include all businesses of any nature. By locating in a local redevelopment area designated as an Opportunity Zone (OZ), a business can take advantage of the state’s highest Job Tax Credit (JTC).
Job tax credit provides a state tax credit for up to five years after creation of new jobs, as long as the jobs are maintained. The tax credit is available to businesses engaged in manufacturing, warehousing and distribution, processing, telecommunications, tourism, and research and development industries. The amount of the credit and the number of jobs that must be created depend on the county in which the jobs are located. The credit amount can be up to $4,000 per job.
Businesses, including retail, in certain census tracts in an area designated as “less developed” or located in the 40 least developed counties, are also eligible for the jobs tax credit. The number of jobs necessary to generate the credit can be as low as 2. The credit can be used 100% against tax liability and if there is no liability, can be taken against the withholding tax liability on employee payroll.
Quality Jobs Tax Credit
Companies that create at least 50 jobs in a 12-month period where each job pays wages at least 110 percent of the county average are eligible to receive a tax credit of $2,500-$5,000 per job, per year, for up to five years, based on the scaled system below. New quality jobs created within seven years can qualify for the credit. Credits may be used to offset the company’s payroll withholding once all other tax liability has been exhausted, and may be carried forward for 10 years. New jobs that do not meet the requirements for the Quality Jobs Tax credit may count toward the Jobs Tax Credit Program if they meet the eligibility requirements for that program separately.
Governor Deal has proposed the decrease of the quality job creation threshold from 50 jobs to 15 but the reduction has not passed at this time.
Employer retraining tax credit provides a state tax credit of half the cost of training for a full-time employee up to a maximum of $500 per person in each training program and up to $1,250 per employee per year. The retraining applies to virtually any training of existing employees resulting from new technologies and workplace changes.
Investment tax credit provides a tax credit for certain taxpayers that invest in new or expanded facilities within the state. The amount of credit varies according to the county where an expansion project is located. It is based on the same tiers as the State Job Tax Credit and requires certain minimum expenditures in order to claim this credit.
Optional investment tax credit provides a state tax credit for certain taxpayers that invest in new or expanded facilities within the state on or after January 1, 1996. It is similar to the regular Investment Tax Credit; however, there are higher spending thresholds. Companies with projects of $5 million to $20 million, depending on whether the facility is located in a tier 1, tier 2 or tier 3 and 4 county respectively, may qualify. Tier 1 includes the least developed counties, with tier 2 and tier 3 and 4 including successively more developed counties.
Employer credit for child care provides a state tax credit of up to 50% of the cost of employer-sponsored or employer-provided childcare. Allowable costs include items such as real property and equipment, and annual expenses including salaries, supplies and utilities. An employer can carry forward credits for up to five years.
Teleworking credit provides a tax credit up to $1,200 per participating employee to employers who permit their employees to telework. The percentage of the credit ranges from 100% to 25% depending upon whether the business is located in a federal “nonattainment” area, and the number of telework days claimed per month.
Land conservation credit provides for an income tax credit for the qualified donation of real property that qualifies as conservation land. Taxpayers will be able to claim a credit against their income tax liability not exceeding 25 percent of the fair market value of the donated property, or 25 percent of the difference between the fair market value and the amount paid to the donor if the donation is effected by a sale of property for less than fair market value.
Beginning in January 2012, the conservation tax credit will become transferable. Meaning, taxpayers who cannot personally utilize the state income tax credit, will be able to sell their credit to other Georgia resident taxpayers.
Qualified education expense credit provides a tax credit for qualified education expenses. A corporation is eligible for a credit amount that can equal up to 75% of its income tax liability. The credit is allowed on a first-come, first-serve basis. The taxpayer must add back to Georgia taxable income that part of any federal charitable contribution deduction taken on a federal return for which a credit is allowed. Taxpayers must request preapproval to claim this credit.
Clean energy property credit provides a tax credit for the construction, purchase, or lease of clean energy property that is placed into service in Georgia between July 1, 2008 and December 31, 2014.
If lighting performance is improved by 30% by lighting fixtures, sensors, and controls it would meet the requirements for credit. Taxpayers must request preapproval to claim these credits.
Basic skills education tax credit provides a state tax credit of up to one-third of the direct cost of education per full-time equivalent employee. The maximum credit is $150 per employee, and can be received only for basic skills programs approved by the Department of Technical and Adult Education. The training must enhance reading, writing and mathematical skills up through the 12th grade level, and is for employees who are unable to function effectively on the job due to lack of these skills.
Qualified health insurance expense credit provides an employer (who employs 50 or fewer directly or on Form 1099) a tax credit for qualified health insurance expenses in the amount of $250 for each employee enrolled for twelve consecutive months in a qualified health insurance plan. Qualified health insurance means a high-deductible health plan that includes at a minimum, catastrophic health care coverage which is established and used with a health savings account. The qualified health insurance must be available to all employees. The total amount of the tax credit for a taxable year cannot exceed the employer’s income tax liability.
There are hundreds of different tax credits and incentives at the Federal, state and local levels. The list above is only a representation of the credits available -- not a complete list. There are also local incentives available such as property tax exemptions and abatements, sales tax exemptions, and training programs, to name a few.
Our job is to help you take advantage of these credits and incentives and increase your cash flow. Please call, email, or stop by our office and we will schedule a meeting to discuss tax credit and incentive opportunities available for your business.