Small business owners are always on the lookout for ways to minimize their tax liabilities while maximizing profits. One such way is to take advantage of small business tax credits. In 2022, there will be changes to the small business tax credit that business owners need to be aware of.
Firstly, the maximum credit for small business health care expenses and insurance premiums will increase from 50 percent to 70 percent of premiums paid in 2022. This means that business owners can receive a tax credit of up to 70 percent of their health insurance premium costs. Additionally, the maximum amount of the credit will be available to businesses with up to 10 employees, with the credit decreasing as the number of employees increases.
Secondly, the Small Business Health Care Tax Credit will be available to businesses that pay premiums for their employees’ vision or dental insurance. Previously, only premiums for medical or hospital insurance were eligible for the tax credit. This change allows small businesses to offer their employees more comprehensive insurance coverage while still being able to benefit from the tax credit.
Furthermore, businesses that have been affected by COVID-19 may also be eligible for a tax credit. The Employee Retention Credit (ERC) has been extended until December 31, 2021. This credit was created to encourage businesses to keep employees on their payroll during the pandemic. Eligible businesses can receive a credit of up to $7,000 per employee per quarter in 2021.
It’s important to note that businesses cannot claim both the Small Business Health Care Tax Credit and the ERC for the same wages. This may require business owners to do some calculations to determine which credit will benefit them the most.
In conclusion, small business owners need to be aware of the changes to the small business tax credit in 2022. With the maximum credit for health care expenses and insurance premiums increasing, the Small Business Health Care Tax Credit now covers vision and dental insurance, and the ERC extended until the end of 2021, small business owners have more opportunities to reduce their tax liabilities while fostering their businesses. It’s important to consult with a tax professional to ensure that these tax credits are correctly claimed.
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