A simple lesson.
At Rebate, we understand that running a business is rewarding and all-consuming. When you run a startup or small business, it’s tough to find the time and energy to file your own taxes and make sure you’re claiming all of the deductions and credits you possibly can.
Tax credits are often confused with tax deductions, but they are two separate things.
Deductions decrease your overall taxable income and determine your tax bracket so you may end up paying less based on the amount of income you’re actually taxed on. Businesses can claim for many normal business expenses and there are even specialized deductions for things like at-home businesses.
Tax credits, on the other hand, reduce your final tax bill on a dollar-for-dollar basis. When you claim a tax credit, you typically can’t claim a deduction for the same expense, but the money you’re saving can go right back into your company’s budget.
For example: let’s say you owe $30,000 in payroll taxes. If you qualify for and claim a $10,000 tax credit for research activities and expenses, you can subtract that amount of money directly from what you owe, leaving a $20,00 tax bill.
Also unlike deductions, if you’re eligible for a small-business tax credit, like the R&D Tax Credit, but fail to claim it one tax year, you may be able to carry forward the credit to a future tax year.
Tax credits are very impactful to your business, even more so than deductions, and it’s important to have experts backing your credit efforts, too. When you work with Rebate’s team of specialized tax professionals, you are receiving a personalized analysis of your business expenses and activities to ensure the highest, most accurate credit.
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