As tax season approaches, small business owners and solopreneurs face significant challenges. Even when managing quarterly taxes effectively, this period requires a thorough review of business finances and necessary adjustments to ensure ongoing financial health.
Fortunately, there are several valuable tax credits available for small business owners for the upcoming 2024 tax year. These credits, which range from employee retention to healthcare benefits, are designed to provide essential support during tax season.
Understanding Tax Deductions vs. Tax Credits
The key distinction between a tax deduction and a tax credit lies in their application. A tax deduction reduces your taxable income, potentially lowering your overall tax bracket, while a tax credit directly reduces your tax liability, allowing for dollar-for-dollar savings on applicable credits.
Here are the top tax credits for small business owners in 2024:
Disabled Access Tax Credit
The Disabled Access Tax Credit offers coverage for 50% of expenses incurred (up to $10,250) to enhance accessibility for individuals with disabilities. This includes costs for hiring interpreters and providing alternative materials for those with visual impairments.
Empowerment Zone Employment Credit
This credit provides up to $3,000 per employee for businesses operating in empowerment zones or distressed areas that hire and retain employees. The credit can be claimed for an unlimited number of employees and is renewable each year.
Qualified Plug-in Electric and Electric Vehicle Tax Credit
If your small business purchased a plug-in electric vehicle—like an electric car or scooter—after 2010, you may be eligible for a tax credit ranging from $2,500 to $7,500, depending on your EV’s battery size.
R&D Tax Credit
SECURE 2.0 Act
The SECURE 2.0 Act offers valuable tax credits to small businesses that set up a 401(k) plan for their employees or enhance existing plans with auto-enrollment features.
Small Business Health Care Tax Credit
This credit assists small businesses in establishing health insurance programs for their employees, covering 50% of premiums for up to two consecutive years. Eligibility requires having fewer than 25 full-time employees and meeting average wage criteria.
Work Opportunity Tax Credit
The Work Opportunity Tax Credit, recently extended through the end of 2025, benefits small businesses that hire individuals facing employment barriers, including ex-felons and certain veterans. Eligible businesses can receive up to $2,400 for each new qualifying hire.
