The Importance of Small Business Tax Planning
Tax planning is just as important to your business as your operating costs. Taxes are a major fixed cost that never goes away; however, with proper tax planning, your business can significantly trim tax costs with tax deductions and tax credits.
The Difference Between Tax Deductions and Tax Credits
Tax deductions reduce tax liability by allowing business owners to, “write off,” certain expenses incurred throughout the year. The amount of deductions that a company can take is directly dependent on the amount of taxable income that the company has. Most businesses write off expenses such as office supplies, auto expenses, and business travel expenses. Despite the many tax deductions that a business can take advantage of, tax deductions can only reduce a business’ tax liability to zero.
A tax credit is a dollar for dollar value used to offset tax liability. With tax credits. business owners have the opportunity to reduce and in some cases eliminate tax liability. There are over 90 different tax credits available in Georgia to businesses that qualify and each tax credit has its own specific set of qualifications and laws.
Including Tax Credits in Your Plan
In Georgia, corporate income tax credits can be applied to half of a businesses’ state tax liability in any given year. If your business is an S-Corporation, the tax credit benefits can flow through to the shareholders and be applied to their personal income taxes. With those types of savings, that means that your business can save money, retain more cash flow, and expand. If you have a brick and motor business or if you plan to move your business to a new location, consider moving into an opportunity zone, less developed census tract (LDCT), military zone or in a tier 1 county. Businesses in these locations are eligible to take advantage of significant job tax credits. This year, Clayton County has been qualified as a tier 1 county with special benefits and tax credit availability to all businesses that hire at least two new employees this year.
For more help on how to take advantage of tax credits, give our office a call or send us an email.