Every year businesses and individuals alike begin preparing the previous year's financial statements and reports during the period between January 1 and April 15. Many rely on the expertise of an accountant or tax preparer to ensure all paper work is in order and they get the largest deduction as possible.
But what if, instead of scouring the internet for overlooked tax deductions during tax season (such as renting your home to your S Corporation to receive tax-free income or deducting your health insurance if you are the owner of an S Corporation), you could take advantage of tax credits now? Well, you can.
There are a number of businesses that don't take advantage of state and local tax credits and business incentives. As a result, countless financial resources are being left on the table to assist companies and infuse cash into their business.
There are tax credits that are not your typical IRS tax deductions. These tax credits like the IRS deductions help minimize or eliminate your tax burden. Each state or local municipality has tax credits and incentives often related to job creation or capital investment and can be found on their homepage or its corresponding economic development organization's website.
For example, if you know you're expanding in Chicago, search the internet for 'Chicago tax credits and incentives.' You'll find dozens of websites dedicated to economic development incentives in the Chicago area. Usually the first three websites have all the comprehensive financial information you're looking for.
While the eligibility varies, it's no different than finding the right IRS tax deduction that your business qualifies for too.
No need to fret. Qualifying is not insurmountable. For example, the Arizona Quality Jobs tax credit offers up to $9,000 of Arizona income or premium tax credits spread over a three-year period for each net new quality job ($3,000 per year). Eligibility qualifications are a minimum of 25 new jobs in a metropolitan area and a minimum of five new jobs in a rural community.
No matter the size of your company, tax credits and incentives can present a significant opportunity. By securing available tax credits and incentives you can reduce your tax burden, manage costs more effectively, improve earnings, and the list goes on.
Similar to hiring a tax preparer to file your tax return, you may also want to hire a consultant to seek out the best value state tax credit. Don't wait to tax season to begin securing and tracking down tax credits.