Top 5 Tax Benefits for Maryland Small Businesses
Small businesses are the backbone of the American economy, contributing to job creation and overall growth. In Maryland, small businesses make up more than 99% of all businesses and employ around half of the state’s workforce. However, running a business can come with various financial challenges, including taxes. Fortunately, small businesses in Maryland are eligible for many tax benefits that can help them save on their tax bills. In this article, we will discuss the top 5 tax benefits for Maryland small businesses.
1. Maryland Small Business Tax Credit
The Maryland Small Business Tax Credit is a state tax credit available to businesses that have employed 14 or fewer full-time employees in the state for at least six months of the tax year. If the business qualifies, it can claim up to $3,000 in tax credits for each qualified employee hired. This credit can be used to offset the business’s state income tax liability or to receive a refund if the business has no tax liability. To qualify, the business must make contributions to a qualified retirement plan for each employee.
2. Federal Tax Credits
There are various federal tax credits available to small businesses that can help offset the costs of doing business. Two of the most popular tax credits are the Work Opportunity Tax Credit and the Family and Medical Leave Act Tax Credit. The Work Opportunity Tax Credit is a federal tax credit available to businesses that hire people from certain targeted groups, including veterans, ex-felons, and those receiving certain government benefits. The Family and Medical Leave Act Tax Credit is a federal tax credit available to businesses that offer paid leave to certain employees for family or medical reasons.
3. Section 179 Deduction
The Section 179 deduction is a federal tax deduction that allows small businesses to deduct the full cost of certain qualifying equipment or software in the year it was purchased rather than depreciating the cost over several years. In 2021, small businesses can deduct up to $1.05 million in qualifying equipment or software.
4. Research and Development Tax Credit
The Research and Development (R&D) tax credit is a federal tax credit that rewards small businesses for making investments in research and development. To qualify for the R&D tax credit, a business must conduct research activities that are intended to develop new or improved products, processes, or software. The tax credit can be claimed against both federal and state income taxes.
5. Maryland One-Stop Shop Tax Credit
The Maryland One-Stop Shop Tax Credit is available to small businesses that purchase or lease property in designated revitalization areas in the state. This tax credit can be up to 10% of the total costs of the property purchased or leased, up to a maximum of $250,000. To qualify, the property must be used for business purposes, and the business must operate in the property for at least five years.
In conclusion, small businesses in Maryland can take advantage of multiple tax benefits to save on their tax bills. From state and federal tax credits to deductions, these tax benefits can make a significant difference in keeping the finances of any Maryland small business healthy. Moreover, small businesses should consult with their tax professionals to determine how they can take advantage of these benefits effectively. Both state and federal tax codes change frequently; thus, business owners should continually monitor tax law changes to maximize their tax savings.
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