Tax credits play a pivotal role in the landscape of entrepreneurship, particularly for small business owners who consider their employees to be invaluable assets that are central to the organization’s success and cultural fabric. The pursuit of workforce diversity and inclusion goes beyond merely adhering to ethical standards; it significantly enriches community dynamics and enhances the overall business value. While it’s commendable that many entrepreneurs, including those associated with Legacy Private Trust Company, are devoted to sustainable hiring practices, they may not be fully aware that the federal government offers fiscal incentives, such as tax credits, specifically designed to support and reward these laudable business behaviors.
A Range of Available Tax Credits and Incentives
Several tax credits available to business owners can significantly impact the company’s financial health while reinforcing its commitment to responsible business practices. Below are four key tax credits that merit further exploration:
- Employee Retention Tax Credit (ERTC): Originating in response to the economic upheavals caused by the COVID-19 pandemic, the Employee Retention Tax Credit is a relief measure for businesses that have faced disruptions yet have managed to maintain their workforce. This credit serves as a financial buffer and rewards businesses that have held onto staff during economically challenging periods. Qualifying for this tax credit can yield substantial fiscal benefits, allowing companies to focus on recovery and future growth.
- Work Opportunity Tax Credit (WOTC): If your business is expanding its workforce, the Work Opportunity Tax Credit offers a financial incentive to hire from within ten designated groups that often encounter obstacles to employment. This tax credit serves a dual purpose: it reduces tax liability while promoting workforce diversity and inclusion. The extension of WOTC until December 31, 2025, provides ample time for businesses to plan hiring strategies around this beneficial tax provision.
- Differential Wage Payment Credit: This tax credit provides significant financial relief for employers who remain committed to compensating their employees on active military duty. Employers could be eligible for a credit of 20% of up to $20,000 in differential wage payments for each qualifying employee. This initiative is aligned with the federal government’s objective to support businesses that stand in solidarity with employees who have opted for military service.
- Paid Family and Medical Leave Credit: Understanding the critical balance between work and life, this tax credit is tailored for businesses that offer paid family and medical leave to their employees. By fostering a supportive work environment, you cultivate employee well-being and become eligible for financial benefits under this tax initiative.
A Business-First Approach: Prosperity for All
These tax incentives illustrate a key principle: prioritizing business growth can go hand-in-hand with enhancing community welfare. When companies focus on robust financial strategies, including taking care of employees and engaging in their communities, it leads to widespread economic benefits.
Consult Professional Guidance for Optimal Benefits
For businesses already implementing these strategies, it’s essential to leverage available tax credits to strengthen your financial position fully. For those yet to adopt these practices, these incentives provide a dual opportunity to enhance your community presence and improve your financial outcomes.
In either case, consultation with tax professionals, such as Legacy Private Trust Company, is essential for ensuring compliance and optimizing the benefits these incentives can bring to your business. With proper guidance, these tax credits can become valuable tools in achieving your community engagement goals and financial objectives.
If you are a Legacy client and have questions, please do not hesitate to contact your Legacy advisor. If you are not a Legacy client and are interested in learning more about our approach to personalized wealth management, please contact us at 920.967.5020 or connect@lptrust.com.
This newsletter is provided for informational purposes only.
It is not intended as legal, accounting, or financial planning advice.
