< Back to Thought Leadership

These Tax Credits Just For Small Businesses Could Reduce Your 2017 & 2018 Tax Bills

Maximizing available credits is especially important now that the Tax Cuts and Jobs Act has reduced or eliminated some tax breaks for businesses. There are two still-available tax credits for small businesses that can provide certain employee benefits.

1. Credit for paying health care coverage premiums

The Affordable Care Act (ACA) offers a credit to certain small employers that provide employees with health coverage. The maximum credit is 50% of group health coverage premiums paid by the employer, if it contributes at least 50% of the total premium or of a benchmark premium. For 2017, the full credit is available for employers with 10 or fewer full-time equivalent employees (FTEs) and average annual wages of $26,200 or less per employee. Partial credits are available on a sliding scale to businesses with fewer than 25 FTEs and average annual wages of less than $52,400.

The credit can be claimed for only two years, and they must be consecutive. (Credits claimed before 2014 don’t count, however.) It is possible the credit will go away in the future if lawmakers in Washington continue to try to repeal or replace the ACA.

At this point, most likely any ACA repeal or replacement would not go into effect until 2019 (or possibly later). So if you claim the credit for 2017, you may also be able to claim it on your 2018 return next year (provided you again meet the eligibility requirements). This strategy can allow you to take full advantage of the credit while it’s available.

2. Credit for starting a retirement plan

Small employers (generally those with 100 or fewer employees) that create a retirement plan may be eligible for a $500 credit per year for three years. The credit is limited to 50% of qualified start-up costs.

Of course, you generally can deduct contributions you make to your employees’ accounts under the plan. And your employees enjoy the benefit of tax-advantaged retirement saving.

If you didn’t create a retirement plan in 2017, you might still have time to do so. Simplified Employee Pensions (SEPs) can be set up as late as the due date of your tax return, including extensions. If you’d like to set up a different type of plan, consider doing so for 2018 so you can potentially take advantage of the retirement plan credit (and other tax benefits) when you file your 2018 return next year.

 

Determining eligibility

Keep in mind that additional rules and limits apply to these tax credits. We’d be happy to help you determine whether you’re eligible for these or other credits on your 2017 return, and also plan for credits you might be able to claim on your 2018 return if you take appropriate actions this year. If you’re interested in discussing, please contact your local Blue & Co. tax advisor today.

 

Tax Reform Resource Center

Read More Thought Leadership Articles Like what you read? Subscribe to our newsletter. Click Here.

 

Identify the best tax planning strategies for you. Click here to go to our 2018 Year-End Tax Planning Guide.

Recent Articles

2019 – Significant Tax Law Changes for Individuals

Significant Tax Law Changes for Individuals in 2019

As the result of the Tax Cuts and Jobs Act (TCJA), many changes to the tax law went into effect in 2018 and either apply through 2025 or are now permanent. However, there are two major changes enacted by the TCJA which take effect beginning in 2019. Here’s a closer look. 1. Medical Expense Deduction […]

Learn More
What’s Your Business Exit Plan_ Make It Part Of Your Tax Planning.

What’s Your Business Exit Plan? Make It Part Of Your Tax Planning

It may seem odd to develop a business exit plan this soon, but you must look out for your own financial future. You have to consider your company’s income and expenses and applicable tax breaks (especially if you own a pass-through entity). For example, you need to develop an exit strategy so taxes do not […]

Learn More

IRS Waives Penalty for Some Who Underpaid Their Taxes in 2018

If you didn’t adjust your withholdings or estimated tax payments in 2018 and now owe tax, you could qualify for penalty relief. On January 16, 2019, the Internal Revenue Service announced that it is generally waiving the estimated tax penalty for taxpayers who have paid at least 85% of their total tax liability during the […]

Learn More