Certain tax breaks are only available for a limited time. Most of the changes in the Tax Cuts and Jobs Act for individuals, unless subsequent legislation extends them, are only through 2025. Other tax provisions have earlier expiration dates, so it behooves business owners to take advantage of these tax while they can.
Here are just a few that might apply to your business:
Credit for Paid Family and Medical Leave
Federal law does not require business owners to provide paid leave to employees, however if they do, they may qualify for a tax credit. So long as the business has a written policy that offers at least two weeks of paid family and medical leave and business pays at least 50% of wages normally paid to the employee, the business can take a tax credit. The credit amount ranges from 12.5% to 25% of wages, depending on what was paid. The credit only applies in 2018 to employees who earned no more than $72,000 in 2018. The earning amount may increase in 2019, and the law is set to expire on December 31, 2019. Note, businesses cannot take this credit to the extent paid leave was paid by a state or local government or required by state or local law.
Work Opportunity Credit
If a business expands its workforce, it may be eligible for a special tax credit if the employee(s) that were hired are in a targeted group. It is estimated 10% to 20% of employees could fall within these groups:
- Long-term family assistance recipient
- Qualified recipient of Temporary Assistance for Needy Families (TANF)
- Qualified veteran
- Qualified ex-felon
- Designated community resident
- Vocational rehabilitation referral
- Summer youth employee
- Supplemental Nutrition Assistance Program (SNAP) benefits (food stamps) recipient
- SSI recipient
- Qualified long-term unemployment recipient
The amount of the credit varies with the targeted category. It ranges from $2,400 for most categories (less for summer youth) to $9,600 for a veteran with a service-connected disability.
To qualify for the credit, the business must submit Form 8850, Pre-Screening Notice and Certification Request to the state workforce agency no later than 28 days after a new employee begins work. If the business fails to do this, it cannot take the credit even if the new employee would otherwise fall into a targeted group. This law is also set to expire on December 31, 2019.
Credit for Electric-powered Vehicles
If a business owner buys an electric-powered vehicle, he or she may be eligible for a tax credit of up to $7,500. If the vehicle is for business, the credit is part of the general business credit.
This credit phases out when a manufacturer sells more than 200,000 vehicles. Tesla achieved this landmark in sales in July 2018. As a result, the full credit amount will only apply to vehicles purchased through December 31, 2018.
For purchases from January 1, through June 30, 2019, the credit limit will be only $3,750. The limit will fall to $1,875 for vehicles bought from July 1 through December 31, 2019. And no credit for an electric-powered vehicle will be available after 2019.
Contact your accountant and attorney to make sure you can qualify for, and claim, these credits.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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