How tax credits can lower your business costs
If you’re a small business owner, you already know taxes are one of your biggest expenses. What you might not know? You could be paying more than you have to.
Tax credits are one of the most effective ways to reduce your tax bill, yet most businesses don’t take full advantage of them. Why? Because the tax code is complicated, and figuring out what you qualify for takes time—time most business owners don’t have. And, frankly, a lot of accountants don’t have the resources to do a deep dive on every possible tax credit either.
That’s where holistic tax planning comes in. It’s not just about filing taxes on time or finding a few deductions—it’s about making sure every dollar you’re eligible to keep stays in your business. And that includes claiming every tax credit available to you.
What’s the difference between a tax deduction and a tax credit?
Before we go any further, let’s clear up a common question: what’s the difference between a deduction and a credit?
- Deductions lower your taxable income, which means you pay taxes on a smaller amount. Helpful, but not game-changing.
- Tax credits directly reduce what you owe, dollar for dollar. If you qualify for a $5,000 credit, that’s $5,000 off your tax bill. Big difference.
Now let’s talk about the credits most businesses miss.
Common tax credits that can save you thousands
There are dozens of tax credits out there, but here are a few that small and mid-sized businesses often overlook:
1. Work Opportunity Tax Credit (WOTC)
If you’ve hired employees from certain groups—veterans, individuals on government assistance, or formerly incarcerated individuals—you may qualify for a tax credit worth up to $9,600 per employee. The best part? This credit isn’t just for big corporations; small businesses can benefit too.
2. Employee Retention Tax Credit (ERTC)
This one got a lot of attention during COVID, but many businesses still don’t realize they’re eligible. If you kept employees on payroll during government-mandated shutdowns or experienced revenue losses in 2020 or 2021, you could qualify for up to $26,000 per employee. Even if you took a PPP loan, you might still be eligible.
3. Research & Development (R&D) Tax Credit
Think R&D is just for tech startups? Think again. If you’ve improved a product, process, or software—even if you’re in manufacturing, construction, or food production—you might qualify for this credit. It can be applied to offset payroll taxes, making it especially valuable for startups and small businesses.
4. Energy Efficiency Tax Credits
If you’ve made energy-efficient improvements to your business—like upgrading HVAC systems, installing solar panels, or making commercial buildings more energy-efficient—you might be eligible for credits that significantly lower your tax bill.
5. FICA Tip Credit
If you own a restaurant or bar where employees receive tips, the FICA tip credit helps offset the employer portion of payroll taxes on those tips. This can add up to serious savings for hospitality businesses.
Why many businesses miss out on tax credits
The biggest reason businesses don’t claim all their eligible tax credits? They don’t know about them. Tax law changes constantly, and keeping up with it is a full-time job.
Another issue? Many accountants focus on tax preparation—getting your return filed accurately and on time—but not on tax strategy. They might catch the most obvious deductions, but they’re not necessarily going out of their way to see if you qualify for a credit that requires extra paperwork, documentation, or back-and-forth with the IRS.
Real tax planning = lower bills + peace of mind
That’s where working with Arvo makes the difference. We don’t just prepare tax returns—we take a holistic approach to tax planning. That means we analyze every angle of your business to find every credit and deduction you qualify for. We handle the paperwork, the calculations, and the compliance checks, so you don’t have to worry about missing out or getting audited down the road.
When you work with Arvo, you can rest easy knowing:
- You’re paying the lowest amount legally possible in taxes.
- Every eligible tax credit is accounted for.
- Your tax strategy supports your long-term business goals.
Don’t leave money on the table. If you’re ready to make sure you’re getting every tax break you deserve, Arvo’s here to help. Let’s talk.