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Tax credits for your business pack a dollar-for-dollar punch

Small-business owners are always looking for ways to minimize taxes and save money. There are various year-end tax planning strategies to help increase your deductions and identify credits that will minimize your taxes.

Small-business owners are always looking for ways to minimize taxes and save money. There are various year-end tax planning strategies to help increase your deductions and identify credits that will minimize your taxes.

While tax deductions reduce your profit, tax credits are a credit against the total tax owed.

On a personal tax level, a tax deduction would be an itemized deduction, such as mortgage interest; a tax credit would reduce your tax bill dollar for dollar, such as an education tax credit when you or your child attends college.

There are both federal and state tax credits available to businesses. Some are specific to certain industries, but many are available to all businesses.

And in Pennsylvania, you get an additional benefit: certain tax credits can be bought from and sold to other businesses, usually at a discount of 10 percent.

The research and development tax credit is available if your company spends money on qualified research.

The credit for a small business is 20 percent of the increase in spending over the base period. The research must qualify under the rules for federal research and development expenses.

The Pennsylvania Keystone Innovative Zone tax credit is available to for-profit tech companies that are less than 8 years old and are within a KIZ. There are multiple KIZ sites in Pennsylvania, including South Bethlehem, East Stroudsburg University, Reading and Bucks County.

The maximum tax credit available is $100,000 and is based on a year-over-year increase in revenue from within the KIZ.

Another tax credit in Pennsylvania is the Educational Improvement Tax Credit for contributing to scholarship organizations to promote expanded educational opportunities for students (maximum $750,000 tax credit per year).

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