In most countries, small businesses are given tax breaks to incentivize them on certain matters, such as paying medical insurance for their employees. These breaks are also meant to make it easier for them to stay afloat especially in the first few years of operation.
The federal government has put measures in place to ensure only companies that meet the set thresholds qualify for these breaks.
- Small Employer Health Care Credit
If your organization, say, Diamond and Diamond, employs at least 10 full-time employees (as of 2017) and pays part of their medical insurance, it qualifies for this tax break. The motive behind this break is to encourage more small employers to pay medical coverage for their employees. There are several rules that govern this tax credit, including the annual average wage -$26,200 as of 2017. A different class of credit is given to an employer with less than 25 full-time employees earning an average $52,400 (2017) per year.
- Retirement Plan Startup Credit
Since few small businesses offer retirement packages to their employees, the government entices more employers to have this running by giving them a tax credit of up to $500 per year for three years. This credit is usually meant to cater to the administration cost of setting up a pension fund and educating employees on the policy. The cost may be higher, but the credit does help.
- Disabled Access Credit
A company that makes it easier for the disabled to access a building or other services can claim a credit cut of not more than $5,000 per year. The expenses that qualify for this credit include those that make it easier for disabled people to do their job. Hiring interpreters, installing ramps, and offering devices to those visually impaired are some of the costs that qualify under this category. For a company to be termed as small and to qualify for this credit, it has to employ not more than 30 full-time employees or have gross receipts not exceeding $1 million in the preceding year.
- Employer Wage Differential Credit
If an employee of an organization is called to military service, then the company can apply to receive a credit of 20% for amounts not exceeding $20,000 for wage differential payments. Wage differential payments will make it possible for the company to pa the person called to serve without losing in revenue so that the person takes home their usual salary while actively serving their country. For an organization to qualify for this tax credit, it must have filled up the paperwork required for employers providing wage differential payments and have less than 50 employees in the year of making this claim.
These tax credits are subject to change and so every employer should be keen on change in legislation. In the meantime, those eligible should take advantage of the credits to lower their tax obligations so that they can plough back the savings into their growing businesses.