What businesses should know about General Business Credits
The general business tax credit is not a single separate credit but a combination of specific tax credits that promote certain business activities, such as research, oil recovery, reforestation or starting a pension plan. Detailed information on how certain business activities qualify for General Business Credits can be found at IRS.gov/Form3800.
Two of the general business credits that are commonly used are the following:
- Qualified Research – the research credit is generally allowed for expenses paid or incurred for qualified research. The research must be undertaken for discovering information that is technological in nature, and its application must be intended for use in developing a new or improved business component of the taxpayer. In addition, substantially all of the activities of the research must be elements of a process of experimentation relating to a new or improved function, performance, reliability, or quality.
- Small Employer Pension Plan Startup Costs – the credit is for qualified startup costs incurred in establishing or administering an eligible employer plan. The credit is 50% of the qualified startup costs paid or incurred during the tax year; it is limited to $500 per year for the first credit year and each of the following 2 tax years.
Feel free to reach out to us if you need assistance with determining your eligibility for general business credits.