2. Hire employees
Are you looking for someone to help in your business? You might consider hiring an employee that will qualify you for the Work Opportunity Tax Credit (WOTC).
The WOTC encourages businesses to hire individuals from targeted groups, including:
- Individuals who receive Temporary Assistance for Needy Families benefits
- Qualified veterans
- Individuals who live in empowerment zones, enterprise communities, or renewal communities2
- People with physical or mental disabilities that have been referred by a vocational rehabilitation service
- Qualified summer youth employees
- Recipients of Supplemental Nutrition Assistance Program benefits
- Individuals who receive social security income benefits
- People who have been unemployed for at least 27 consecutive weeks
The credit you'll receive depends on the number of hours the employee works and the wages they earn. Specifically:
- 120-400 hours: Up to 25% of first-year wages
- 400+ hours: Up to 40% of first-year wages
- Less than 120 hours: no credit
For example, say you hired a qualifying employee who worked 500 hours and earned $15 per hour. Their first-year wages would be $7,500. Your tax credit would be 40% of $7,500, or $3,000. A tax credit is different from a tax deduction. While a deduction reduces your taxable income, a tax credit is a dollar-for-dollar reduction in the amount of tax you owe.
Currently, the Work Opportunity Tax Credit is only available for employees who begin work before December 31, 2019.
3. Invest in professional development
Training and professional development offer a variety of benefits, whether for yourself or employees. It can increase job satisfaction, efficiency, and profitability, all while reducing employee turnover. It can also help you qualify for a tax deduction.
Businesses can deduct business-related training and education costs, as long as the training is used to maintain or improve skills required in your current profession. Expenses that qualify you or your staff for a new trade or business aren't deductible.
If you're not sure whether you can claim any of these tax breaks this year, be sure to talk to a tax professional. Deductions and credits can be a great way to reduce your tax bill, but a tax pro can help you determine exactly how much you can save before you move forward.
As an SBA Preferred Lender, Synovus can provide faster answers for quicker results.