When someone starts a business, tax liabilities are a major concern for them; hence, it’s important you know about the tax benefits offered to businesses. So, many of you must have wondered if there are any tax benefits for women-owned businesses.
The IRS does not discriminate based on gender, race, or other factors to offer special tax benefits; everyone is subject to tax laws. However, there are a few common tax credits and deductions that can help businesses.
Women entrepreneurs in the US are 45% of all entrepreneurs, and the growth of women starting a business has increased over the past years. The shift is thanks to digital tools access, non-profit loans, SBA, and CDFIs.
What are the best IRS incentives for women entrepreneurs?
As we mentioned, the IRS does not have any special incentives for women entrepreneurs to offer some tax benefits, but there are some tax credits for businesses that you can take advantage of to reduce your tax bills:
- Work Opportunity Tax Credit:
- WOT lets you get credit if you hire employees from the targeted groups, such as qualified veterans, individuals with long-term employment, and many others.
- The maximum credit you can receive under the WOT is $2400, which is equal to 40% of the wages you paid to the employees from the targeted group.
- Research and development credit:
- If you have business related to research and development, you can claim the R&D credit up to the qualified expenses.
- The credit will be 20% of the qualified expenses, and they can also offset the payroll taxes up to some limit.
- Empowerment Zone Employment Credit:
- This credit offers credit to the businesses that operate in economically distressed areas and hire the residents of the distressed areas.
- You can receive the wage credit up to $3000 for each qualified employee, which can be beneficial for your business.
- Employer Credit for Paid Family and Medical Leave:
- The IRS offers credit for employers who paid the paid family and medical leave to their employees.
- So, if you have been granted such leave, you can claim this credit equal to the percentage of wages you paid to the qualified employees.
- Retirement Plans Start-up costs:
- If you have set up the retirement plan for your employees, you can secure credit under the SECURE Act 2.0 for the contributions you made.
- This tax credit can help you get a credit of up to $1000 for the contribution you made.
What are the new changes and deductions for businesses?
With the new tax law under OBBA, we have new tax deductions that can help businesses, so if you are a woman entrepreneur, you should be aware of the new tax deductions that can lower your taxable income:
- Qualified Business Deduction: Businesses can now claim the 20% deduction for QBI that will benefit the pass-through entities. The new bill announced the minimum deduction of $400 and expanded the income phase-in ranges for eligible taxpayers.
- R&D expenses: The business can now fully deduct the domestic research and experimentation expenses in a year as they reverse the 2022 provision.
- Bonus Depreciation: The new permanent 100% bonus depreciation for qualifying business assets, meaning you can now deduct the new and used equipment that is placed in service after or on 19 January 2025.
- Home Office deduction: If you have started your business at home and use a portion of your home for your business office, you can claim the deduction on certain expenses.
- SALT Deduction Cap: The SALT Deduction cap is increased from $10,000 to $20,00 for married couples filing jointly, which will benefit businesses in high-tax states.
- Mileage rates: You can claim a tax deduction on vehicle expenses used for business purposes based on the mileage rate.
- Meals/travel/ Internet Phone bills: Apart from these, you can also claim tax deduction on the meal, travel, internet, and phone bills used for business purposes on your taxes.
How does the IRS support small businesses through procurement opportunities?
IRS offers procurement opportunities to small businesses and large businesses. With the Procurement Small Business Program, the agency ensures equal opportunities to small businesses to supply goods and services.
This is an agency effort to provide opportunities to businesses and promote the nation’s economy. The IRS ensures fair competition to obtain a range of services from the businesses and promotes subcontracting opportunities.
Women Entrepreneurs can also use this opportunity if they meet the IRS contract guidelines or get benefits from the Women-Owned Small Business credit program.
What should you do to take advantage of the tax incentives?
If you wish to take advantage of the IRS tax benefits for your business, as a woman entrepreneur, here are things that you should take care of:
- You should keep a record of all your business operations to use later while filing the tax return.
- You should check if you were eligible for the tax credit or deduction last year, and if you were, you can claim it this year.
- If you need any professional help to identify the credits and deductions you can qualify for, you can take professional help.
- You should stay updated on the changing rules of the IRS related to the tax benefits or filing to take full advantage of them.
The IRS does not provide any tax incentives for women and other distressed communities, but you can check out the available tax credits or deductions that are available to lower your financial burden.
