Information on Federal and State Tax Credits

If your company has certain expenses, you can qualify for tax credits from your sate and from the federal government.  These tax credits reduce the tax amounts that you would otherwise pay to your state and the federal government.

You may already be incurring the expenses.  If yes, you certainly should be applying for credits to reduce your tax payments.  Another consideration is to implement a company project (make expenditures) because the project satisfies a company need and also because a tax credit exists which helps to make the economics of the decision more attractive.

Below are six expenditure categories that could qualify for federal and state tax credits. For each category, links are provided to websites that companies can go to for more information on available tax credits from states and the federal government.

1.  New employees.  The federal government offers tax credits when companies hire employees that qualify for the credits.  Click here to learn about the federal government’s Work Opportunity Tax Credit.

Most states offer tax credits for hiring employees under certain conditions.  Click here for a US Library of Congress site that provides links to all states’ home websites.  From these home websites, information on the tax credits offered by the states, not only for hiring new employees but for other tax credits offered, can searched for and found.

2.  Health insurance.   The National Conference of State Legislatures provides an overview and links to information that describe federal and state programs that provide tax credits to employers that provide health insurance to their employees.   Click here to go to this site.

3.  Investments.  Some states offer tax credits to investors who make qualifying investments in companies located in their states.   The Community Development Venture Capital Alliance has published a report that surveys state tax credit incentives for investments.  Click here to assess this report (PDF file).  The state’s websites should also be used to verify whether the state has tax credits for investments in companies.

4.  Energy.   Click here to go to a US Small Business Administration site with information on federal tax credits for energy efficiency.

At this Energy.gov site (click here), tax credits and rebates offered by states, cities, and counties can be found.

5.  Environmental improvements.  The US Environmental Protection Agency has a site which leads to descriptions of each state’s recycling tax incentives.  Click here to go to this site.

6.  New product and process development.   An article published in The CPA Journal identifies the states that offer tax incentives designed to stimulate the research and development of new products and processes.  Also provided is a brief analysis of each state’s incentives.  Click here to read this article.

The federal government also offers a research and development tax credit (for product and process development).  A GrantThornton site provides an overview of the tax credits and the activities that qualify.  Click here to read this overview (PDF file).