In order that your startup should benefit from tax benefits, it’s important to keep a close eye on tax strategies, so that you may minimize the overall amount you pay. Besides, your startup can also qualify for a grant from the US Government or any organizations.
Here’s a List of the Top Tax Benefits for Startups
The R and D Tax Credit
For a startup whose annual receipts are less than $5 million, it’s possible to apply up to $2,50,000 of your federal R and D tax credit and this can be towards your Social Security and Medicare expenses for 5 years each fiscal year. This is great for startups which concentrate more or R and D processes and helps you offset the labor costs associated with it.
When to claim it: You can claim the credit the first quarter after filing your tax returns for the previous year.
Basic Startup Costs
The investment which you have made to begin your company are ideally startup costs and this includes marketing, advertising, employee recruitment and training, market research and professional fees in establishing your business.
- It costs are more than $55,000 you don’t qualify for this deduction.
- For costs in the range of $50,000 to $55,000, the correlating deduction is lowered.
- If it is less than $55,000, you may deduct $5,000 each in business and organizational costs.
Employee and Contractor Expenses
You can claim amounts according to the size of your startup and earnings for employee perks. It includes holiday parties, payroll taxes, savings plans, insurance contributions etc. Even for contract workers, you can claim up to $600 in deductions.
Section 179 Depreciation
This is something startups will love! Section 179 depreciation helps you to deduct all or parts of the costs of personal items like software, machinery, or equipment which you use in your startup at least half the time. Discuss this with a tax professional, who will help you with what to claim as Section 179 depreciation. Beginning January 1, 2018, the maximum annual expense deduction is up to $1 million, with rates adjusted for inflation annually.
When you travel as a part of your business, every travel is considered tax deductible. You can actually claim for your driving miles when you do so on business lines.
However, you need to keep track of business mile and produce records when requested by tax authorities. The rates at which mileage is reimbursed varies each year.
Home Office Deductions
It is noted that many small businesses can deduct a home office for tax purposes. However, the home office must be a separate office, and used solely for business purposes. It is available for house owners and renters as well.
Other Grants which you can avail
Here’s a list of grants we have carefully hunted for you
This is a federally funded program which helps startups collaborate with universities or Federal R&D centers and tech-focused startups could greatly benefit from this. All you need to apply is to submit a proposal – a business plan, estimated costs, executive summary, and a technical proposal.
Street Shares Foundation
This is great for small startups where every month, 3 grants are awarded ranging between $15,000, $6,000 and $4,000 per month. The conditions to apply includes a two-minute video which describes the business, product and how your business will benefit from the grant.
Good news for all the women entrepreneurs out there! This offers an amber grant for women-owned businesses. Each month, a startup owned by women gets to win $1000 and even become eligible for a $10,000 grant. Just provide a brief on your business and how the grant would help you. The application fees cost $15.
Hope these small snippets on grants and tax benefits would be useful to help your startups gain a world of good financially.
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