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Tax Breaks for Small Businesses in 2024: What’s New and What You Can Claim!

Writer's picture: Andrea PieriAndrea Pieri

As a small business owner, staying on top of tax law changes can feel like a full-time job. But don’t worry, 2024 is bringing some exciting updates that can put money back in your pocket! With the right strategies and knowledge, you can take advantage of these tax breaks and maximize your savings. Whether you’re a startup or an established business, the opportunities this year are plenty.


Let’s take a look at what’s new for 2024 and the valuable tax breaks you should be claiming to make the most of your hard-earned revenue.


1. Expanded R&D Tax Credit (Research and Development Credit)

Innovation pays off—literally! The Research and Development (R&D) Tax Credit has been a favorite for businesses involved in developing new products, improving processes, or creating software. In 2024, this tax credit is even more accessible for small businesses thanks to changes that allow more industries to qualify.


What’s New:

  • The scope of what qualifies as “R&D” has broadened, meaning more industries like food, agriculture, and even creative sectors may now qualify.

  • Businesses with under $5 million in gross receipts can use the credit to offset payroll taxes, not just income taxes, up to $500,000 per year.


How You Benefit: If your business spends money on product development, new technologies, or process improvements, this credit can offer substantial savings. Even if you're in a non-traditional industry, it’s worth checking with a tax professional to see if you qualify for this lucrative credit.


2. Section 179 Deduction: Invest in Your Business and Save Big

If 2024 is the year you’re planning to upgrade equipment, office furniture, or vehicles for your business, you’ll love the Section 179 Deduction. This allows businesses to deduct the full purchase price of qualifying equipment in the year it’s purchased, rather than depreciating it over several years.


What’s New:

  • For 2024, the deduction limit is set at $1.16 million, allowing you to deduct more in a single year.

  • The phase-out threshold for total equipment purchased is now $2.89 million, meaning even larger small businesses can take full advantage of the deduction.


How You Benefit: This tax break is perfect for businesses that are expanding or upgrading their operations. By deducting the full purchase price upfront, you lower your taxable income, which means more money stays in your business. Eligible items include machinery, office equipment, software, and even vehicles.


3. Energy Efficiency Tax Credits: Go Green, Save Green

The push for energy-efficient businesses is getting even stronger, and 2024 brings new and improved energy efficiency tax credits for businesses that make eco-friendly upgrades.


What’s New:

  • The Energy Efficient Commercial Buildings Deduction (Section 179D) now includes higher deduction limits for making your office space or commercial building more energy-efficient, including upgrades to lighting, heating, and insulation.

  • New incentives for investing in electric or hybrid business vehicles and renewable energy installations like solar panels.


How You Benefit: Not only will these green improvements lower your utility bills, but they can also reduce your tax bill. If you're considering sustainability upgrades, now’s the time to make those investments, as these tax credits can cover a significant portion of the costs.


4. Work Opportunity Tax Credit (WOTC)

Hiring new talent in 2024? The Work Opportunity Tax Credit (WOTC) can save you big bucks if you hire individuals from certain targeted groups who often face employment challenges, such as veterans, long-term unemployed, or individuals receiving government assistance.


What’s New:

  • The credit has been extended through 2025, so you can continue benefiting from this tax break when making hiring decisions this year.

  • The amount of credit can be up to $9,600 per qualified employee hired, depending on their group and employment length.


How You Benefit: By tapping into this credit, you not only build a more diverse and inclusive team but you also get rewarded for it! The savings on your taxes can be substantial, making it a win-win for your business and the individuals you employ.


5. Health Insurance Tax Credits for Small Employers

Providing health insurance to your employees is a big commitment, but the Small Business


Health Care Tax Credit makes it a little easier. If you have fewer than 25 full-time employees and provide health insurance, you could qualify for a tax credit that covers a portion of the premiums you pay.


What’s New:

  • For 2024, this tax credit remains one of the most beneficial for small businesses that offer healthcare coverage, with credits of up to 50% of the premiums paid for employees.

  • You need to purchase insurance through the Small Business Health Options Program (SHOP) to qualify, but more plan options and benefits are available this year.


How You Benefit: This credit not only helps offset the cost of providing health insurance but also makes your business more attractive to potential employees. It’s a great way to care for your team while taking advantage of tax savings.


6. Increased Limits for Retirement Plan Contributions

Planning for your future is always a smart move, and in 2024, you can save even more for retirement while cutting your tax bill. The contribution limits for popular small business retirement plans have increased.


What’s New:

  • 401(k) Contribution Limit: Increased to $23,000 for employees (including business owners).

  • Catch-up Contributions: For those 50 and older, the catch-up contribution limit has risen to $7,500.

  • SEP and SIMPLE IRAs: Higher contribution limits for self-employed individuals and small business owners.


How You Benefit: Not only do retirement contributions lower your taxable income, but they also help secure your future. If you haven’t already maxed out your retirement contributions, 2024 is a great time to start, as the higher limits mean even more savings potential.


7. Start-Up Costs Deduction for New Businesses

If you're launching a new business in 2024, you can deduct up to $5,000 in start-up expenses, including costs like legal fees, market research, and advertising. This deduction remains a valuable tool for new entrepreneurs looking to offset the initial costs of starting a business.


What’s New:

  • No significant changes to the deduction amount, but with inflation adjustments, the threshold for deducting organizational costs is now more inclusive.


How You Benefit: This deduction can help reduce the financial burden of launching your business, giving you a head start in those critical early months.


2024 Is Full of Opportunities for Tax Savings!


With new and expanded tax breaks for small businesses, 2024 is shaping up to be a year full of opportunities to save. From maximizing deductions on equipment purchases to taking advantage of green energy credits, there are plenty of ways to reduce your tax burden and keep more money in your business. And let’s not forget the expanded credits for R&D, hiring, and healthcare, which can also significantly boost your bottom line.

By staying informed and working with a knowledgeable accountant, you can ensure you're making the most of every tax-saving opportunity available to you. With these 2024 tax breaks, your business is poised to save, invest, and grow more. Here's to a prosperous year-end!


Curious about additional ways you can save on your 2024 tax filing? Contact us today!

 


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