small business tax creditSmall businesses are often considered the backbone of our economy. In order to help small businesses grow, the government often provides different tax credits. These tax credits can provide incentives that keep costs down for small businesses, and can even help the economy as small businesses are able to hire more workers and provide benefits.

Two tax credits recently highlighted by the IRS include an expanded credit for hiring veterans, as well as improved information about the tax credit offered to small businesses for providing health care coverage to employees.

Hire a Veteran, and Receive a Tax Credit

Late last year, a change to the law expanded the Work Opportunity Tax Credit to businesses that bring on unemployed veterans. There are thousands of veterans looking for work right now, and it can be to your advantage to hire someone who has served our country in the military. The tax credit is up to $9,600 for each veteran hired by a for-profit business. Tax-exempt organizations can receive a credit for up to $6,240 per veteran.

It is important to understand that there are certification requirements. Make sure you understand the requirements and that you file a Form 8850 with your state’s workforce agency within 28 days of the veteran’s start date.

Health Care Coverage Tax Credit

While small businesses have been able to take this credit for a couple of years, it is worth taking another look. If you play at least half the premiums for your employees’ health insurance coverage, you might be able to take this tax credit. This credit has been extended so that it doesn’t end once you are through 2013; instead, there are two additional years of eligibility to claim the credit beginning in 2014.

The credit right now allows you to claim 35% of premiums you pay (25% if your organization is tax-exempt) in tax years 2010 through 2013. Starting in 2014, though, the credit increases to 50% of the premiums you pay (35% for tax-exempt organizations). As you can see, it’s possible to offset some of the cost you pay for employee health coverage. Providing this benefit can be a good way to attract and retain top talent for your business.

Businesses must file Form 8941 to claim the credit, and also file a Form 3800. Tax-exempt organizations must also use Form 8941, and then claim the credit on Form 990-T. The tax credit is one way to afford to provide benefits to employees without costing too much.

Know What You Are Eligible For

As a small business owner, it makes sense to know what you are eligible for in terms of tax credits and tax deductions. Take the time to learn what options are open to you, and plan to take advantage of the credits offered. These credits might give you the ability to hire more employees to expand your business, or retain the employees you already have.

Plan ahead, and prepare for the rest of the year by knowing what tax advantages are being offered to small business owners and employers.