2022 Small Business Tax Credit Guide: Maximize Your Savings Now!
Small business owners have a lot on their plates, especially when it comes to financial matters. Taxes can be one of the most confusing and stressful aspects of running a business, but they are a necessary part of staying compliant and saving your business money. That’s why it’s important to stay up-to-date on all the latest tax credits and deductions available to small businesses. In this guide, we’ll take a look at some of the tax credits and deductions you might be eligible for in 2022, so you can maximize your savings now.
Employee Retention Credit
One of the most significant tax credits available to small businesses this year is the Employee Retention Credit. This credit was initially introduced in 2020 as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, but it has been extended in 2021 and into 2022. The credit allows employers to claim a refundable tax credit of up to $7,000 per quarter for each employee they retain, for up to four quarters. To be eligible, your business must have experienced a significant decline in revenue or have been fully or partially shut down due to COVID-19.
Research and Development Credit
If your small business invests in research and development (R&D) to create new products, processes, or services, you may be eligible for the Research and Development Tax Credit. This credit can help offset the costs of R&D and encourage small businesses to continue to innovate. The credit is generally calculated based on a percentage of the qualified research expenses, which can include wages, supplies, and contracted research expenses.
Section 199A Deduction
The Section 199A Deduction is a new deduction that was introduced in 2018 as part of the Tax Cuts and Jobs Act. This deduction allows owners of pass-through businesses, such as partnerships, LLCs, and S corporations, to deduct up to 20% of their qualified business income (QBI) on their personal tax returns. This deduction can be a significant tax savings for small business owners, but there are certain limitations and qualifications that must be met.
Work Opportunity Tax Credit
The Work Opportunity Tax Credit (WOTC) is another tax credit available to small businesses that hire employees in certain targeted groups, including veterans, ex-felons, and individuals receiving government assistance. The WOTC can provide tax credits of up to $9,600 per eligible employee, depending on the employee’s qualifications and the length of their employment. To take advantage of this credit, your business will need to submit an application to your state’s workforce agency.
Conclusion
As a small business owner, it’s essential to be aware of all the tax credits and deductions available to your business. By taking advantage of these credits, you can save your business money and reinvest those savings back into your operations. In 2022, make sure to pay attention to the Employee Retention Credit, Research and Development Credit, Section 199A Deduction, and Work Opportunity Tax Credit to see if your small business is eligible for any of these valuable tax breaks. Remember, every penny counts when it comes to running a small business, so don’t leave money on the table.
