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:
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.
Work Opportunity and Welfare-To-Work 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 and Welfare-to-Work 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.
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.
Renewal community tax credit provides tax incentives to hire individuals who both live and work in a Renewal Community. The credit is equal to 15% of the first $10,000 in wages in any year if the employee lives and provides services in a Renewal Community. Both full-time and part-time employees may qualify.
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.
GEORGIA TAX CREDITS:
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.
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.
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 $10 million, depending on whether the facility is located in a tier 1, tier 2 or tier 3 county respectively, may qualify. Tier 1 includes the least developed counties, with tier 2 and tier 3 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. This credit is only available for taxable years 2008 and 2009.
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.
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, 2012.
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.
Rapidly growing small business credit provides a tax credit to a business enterprise having a Georgia net taxable income in the current taxable year which is 20 percent or more above that of the preceding taxable year, if such business enterprise’s Georgia net taxable income in each of the two taxable years preceding the current taxable year also was 20 percent or more above each respective preceding taxable year. Your Georgia Income Tax in any of the years affected cannot exceed $1.5 million. The taxpayer must have operated in Georgia for three year before qualifying for the credit, and must have had income in each year. The credit must be claimed in the year earned, there is no carry-forward.
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.