Small-business owners had a lot to juggle in 2023: a shifting landscape of workplace rules, a tighter credit market thanks in large part to the Federal Reserve's interest-rate hikes and an often-chaotic labor market.

It would be easy through all of that to lose sight of tax credits that could help your business.

That's why we've compiled here a list of some of the prime tax credits available as the new year begins. We've also compiled a list of small-business grants businesses can apply for in 2024.

The Employee Retention Credit, through which businesses potentially could receive up to $26,000 per full-time employee, has been in flux as of late. The IRS declared a moratorium on accepting any new claims for the ERC on Sept. 14 through at least the end of the year, citing extensive issues with fraudulent applications.

The IRS then on Oct. 19 said it had created a special withdrawal process for businesses that have submitted an ERC application but have yet to receive any money. That would help business owners who were scammed by bad actors into applying for a credit they did not qualify for — and it was rare to qualify for the full amount.

The first deadline for small businesses to apply for the potentially lucrative credit is April 15. That filing deadline is for the second, third and fourth quarters of 2020, while businesses can apply for the ERC for 2021 quarters by April 15 of 2025.

Business owners with 100 or fewer employees could get a tax credit worth 50% off the startup costs of setting up a qualified retirement plan such as a Simple IRA or 401(k), up to $5,000. For businesses with fewer than 50 employees, there is a startup credit of 100% of administrative costs up to $5,000.

Businesses cannot both deduct the startup costs from expenses and claim the credit. The credit is eligible for each of the first three years of the plan. Businesses that add an auto-enrollment feature can claim a tax credit of $500 per year for a three-year period. 

A tax credit for qualifying electric vehicles of up to $7,500 for vehicles weighing less than 14,000 pounds, and up to $40,000 for vehicles that weigh more than that, is available to business owners, subject to certain limitations.

The credit is slated to last until the end of 2032, according to the Inflation Reduction Act.

An Inflation Reduction Act tax credit of $30,000 to $100,000 is also available for the buildout of electric vehicle charging stations, with the credit to be calculated based on a single unit rather than per location. 

The Work Opportunity Tax Credit is for businesses that hire a wide variety of disadvantaged groups, including previously incarcerated individuals, people with disabilities, veterans and residents of specific low-income communities. The credit is equal to 40% of up to $6,000 in wages paid to a person in one of the qualifying groups in their first year of employment who works at least 400 hours for the business. That means the maximum total credit is about $2,400 and counts toward the business’ income-tax liability.

The FICA Tip Credit allows an eligible business to claim a credit against its income taxes for FICA taxes paid on tipped wages exceeding the minimum wage.

The Inflation Reduction Act doubled the research and development tax credit to $500,000 from $250,000. The credit is refundable and applied against payroll taxes and includes expenditures for a wide variety of expenses, including the improvement or development of products, processes, techniques and software. 

A tax credit is available for paying employees during family and medical leave time. If an employer pays 100% of the worker's wages, they get 25% of the wages paid as a tax credit. If it's 50%, they get 12.5% of those wages in the form of a tax break. Paying below 50% results in no tax-credit eligibility. The years are 2018 through 2025, with the recent government funding legislation having extended the credit.

Businesses located in qualified areas are eligible for a wage credit of up to $3,000 per eligible employee per year. The credit is 20% of the qualifying wages up to a maximum of $15,000 in qualifying wages per employee. Both full-time and part-time employees may qualify, as long as they work at least 90 days during the year in which the credit is claimed. The credit can be claimed every year, and there is no limit to the number of employees a business can claim as long as they qualify. 

Source: Big Dollars are at Stake, but Critical Deadlines Loom for Businesses in 2024 Birmingham Business Journal (January 2, 2024) Andy Medici