There are two ways to decrease your tax liability. The first way is to increase your tax deductions and the second, is to pay attention to tax credits.

 

What are Tax Credits?

 

Tax credits are credits provided by your state or local government to reduce the income tax you owe. Tax credits work in your favor and are generally designed to encourage or reward certain types of behavior that are considered beneficial to your state or local government (either to boost the economy, or to lessen the burden on the environment). Most often, tax will credits the cover expenses you pay during the year (such as the cost to install solar panels), but you must meet certain criteria before claiming them.

 

Unlike tax deductions which reduce your taxable income, tax credits are deducted directly from your tax burden. Rather than decreasing your taxable income, you can use tax credits to receive a dollar amount reduction in your tax liability.

 

Federal Tax Credits 

 

Federal tax credits available for businesses include the general business credit, investment credit, employer-provided childcare and facilities, the Indian employment credit, and more. If your business is eligible for more tax credits than you can legally take that year, you can either: 

 

  • Apply the tax credit to previous years when you did not exceed your credit limit to receive a retroactive refund.

 

  • Carry the balance forward and apply them to the next tax year.

 

State Tax Credits 

 

States often offer tax credits to encourage economic growth and business investments. Each state will have tax credits that provide for businesses that increase employment, utilize local resources, or own/operate their business in underdeveloped cities and regions. Check your state’s treasury department or chamber of commerce for information on what state and local tax credits are available.

 

Visit the Louisiana Department of Revenue and the  Louisiana Economic Development’s  websites to learn more about Louisiana’s Tax Credits. 

Orleans Parish Tax Credits

Jefferson Parish Tax Credits 

 

Many businesses are used to recording their deductions carefully, however they neglect to explore which tax credits are available. Make sure you speak with your accountant to ensure that you have applied any and all applicable tax credits that will benefit your business.