2025 tax filing guidance
As the new tax season approaches, businesses must stay informed about the tax credits available to them. Tax credits directly reduce your tax liability, potentially leading to substantial savings for your business. Here are the most important tax credits to keep on your radar for the coming year.
Research Credit
The Research Credit incentivizes businesses to increase investments in qualified research activities, encouraging innovation and development. This credit is particularly advantageous for startups and small businesses with less than $5 million in gross receipts. They can apply the credit against payroll taxes, providing immediate cash flow benefits.
Key points to consider:
- Eligible expenses include wages, supplies, and contract research costs.
- Startups can claim up to $250,000 annually against payroll taxes.
- Documentation is necessary to substantiate claims.
Work Opportunity Tax Credit
If your business hires from certain disadvantaged groups, you may qualify for the Work Opportunity Tax Credit (WOTC). This credit is designed to encourage the hiring of individuals who may face significant barriers to unemployment such as veterans, ex-felons, and long-term unemployed individuals.
Key points to consider:
- The maximum credit is generally $2,400 per hire but can go up to $9,600 for specific categories of veterans.
- You may claim this credit by completing IRS Form 8850 and providing other required documentation within 28 days of the new hire’s start date.
Family and Medical Leave Credit
Employers providing paid family and medical leave can benefit from this credit, which supports work-life balance initiatives.
Key points to consider:
- The credit ranges from 12.5% to 25% of wages paid during the leave period.
- To qualify, employers must have a written policy providing at least two weeks of paid leave annually at a rate of at least 50% of normal wages to qualifying employees.
- Eligible leave includes those for family caregiving and personal medical needs.
- Certain circumstances allow for this credit to be claimed retroactively. Short-term disability programs may apply in some cases. Speak to your tax advisor to see if these special circumstances may apply to your business.
The family and medical leave credit is scheduled to expire on December 31, 2025, making it a timely consideration for businesses.
New Markets Credit
The New Markets Tax Credit Program (NMTC) incentivizes private investment in economically distressed communities by offering federal tax credits to investors. The program addresses challenges in attracting capital to low-income areas in an effort to help revitalize these communities.
Key points to consider:
- Investors receive a 39% tax credit, claimed over seven years, in return for their equity stake in a Community Development Entity (CDE).
- Eligible investments typically fund projects like community centers, housing, and job creation initiatives.
By understanding and utilizing these tax credits, your business can unlock substantial savings while fostering growth, innovation, and community impact. Contact your opportunity advisor to learn about potential savings for your business at 804.747.000 | email.
Read our tax planning guide for more 2025 business strategies and guidance.
