Businesses | Internal Revenue Service

Standard Mileage Rates

The Internal Revenue Service (IRS) provides standard mileage rates for deducting vehicle expenses for various purposes. These rates apply to business use, as well as charitable, medical, or moving purposes. It is important for businesses to understand and utilize these rates when calculating deductions for vehicle expenses.

Work Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC) is a tax credit available to employers who hire individuals from certain targeted groups that have faced barriers to employment. This credit incentivizes businesses to hire individuals who may have difficulty finding employment, such as veterans, ex-felons, and individuals receiving government assistance. By taking advantage of the WOTC, businesses can reduce their tax liability while also providing opportunities to individuals who need them.

Employee Retention Credit

The Employee Retention Credit (ERC), also known as the Employee Retention Tax Credit or ERTC, is a refundable tax credit designed to support businesses and tax-exempt organizations that were affected by the COVID-19 pandemic. This credit is available for tax years 2020 and 2021 and provides financial relief to businesses that had employees during this challenging period. By claiming the ERC, businesses can receive a credit against their employment taxes, helping to offset the financial impact of the pandemic.

Employer-Provided Childcare Credit

Businesses that provide childcare for their employees may be eligible for a tax credit. This credit is designed to incentivize businesses to offer childcare services, making it easier for employees to balance work and family responsibilities. By providing this valuable benefit, businesses can attract and retain talented employees while also supporting working families.

Opportunity Zones

Opportunity Zones are an economic development tool that aims to stimulate investment and growth in distressed areas of the United States. By investing in Opportunity Zones, businesses can defer tax on eligible gains and potentially reduce their overall tax liability. This program provides businesses with an opportunity to make a positive impact in underserved communities while also benefiting from potential tax advantages.

Clean Vehicle Credits

The Inflation Reduction Act of 2022 provides tax credits for the purchase of electric vehicles (EVs) or fuel cell vehicles (FCVs). These credits are designed to incentivize businesses to adopt clean and sustainable transportation options. By purchasing qualifying EVs or FCVs, businesses can not only reduce their carbon footprint but also benefit from tax savings.

Energy Efficient Commercial Buildings Deduction

Building owners who invest in energy efficiency improvements for certain building systems may be eligible for a tax deduction. This deduction encourages businesses to make environmentally friendly upgrades to their commercial buildings, such as improving HVAC systems or installing energy-efficient lighting. By taking advantage of this deduction, businesses can reduce their tax liability while also contributing to a more sustainable future.

Credit for Builders of Energy-Efficient Homes

Contractors who build or substantially reconstruct qualified energy-efficient homes may be eligible for tax credits. These credits provide an incentive for builders to construct homes that meet specific energy efficiency criteria. By incorporating energy-efficient features into their projects, contractors can not only attract environmentally conscious buyers but also benefit from tax savings.

Advanced Energy Project Credit

Manufacturers and other entities that invest in qualifying advanced energy projects may be eligible for a tax credit through the Department of Energy. This credit encourages businesses to invest in innovative projects that promote clean and renewable energy sources. By participating in advanced energy projects, businesses can contribute to a more sustainable future while also receiving financial incentives.

Research Credit

The IRS provides guidelines and audit technique guides for field examiners on the examination of research credit cases. This credit is designed to encourage businesses to invest in research and development activities. By conducting research and development, businesses can drive innovation and improve their competitiveness. The research credit provides a tax incentive for businesses to invest in these important activities.

Deducting Business Expenses

Understanding the different types of business expenses and what is deductible is crucial for businesses. The IRS provides general rules for deducting expenses, including guidelines on what qualifies as a deductible business expense. By properly deducting business expenses, businesses can reduce their taxable income and lower their overall tax liability.

Abusive Tax Shelters and Transactions

The IRS has a comprehensive strategy in place to combat abusive tax shelters and transactions. This strategy includes guidance on identifying and addressing abusive transactions, regulations governing tax shelters, and a hotline for taxpayers to report abusive technical transactions. The IRS also takes enforcement action against promoters and investors involved in abusive tax shelters. By cracking down on abusive tax practices, the IRS aims to ensure fairness and integrity in the tax system.

Limitation on the Deduction for Business Interest Expense

The limitation on the deduction for business interest expense, also known as the "section 163(j) limitation," imposes restrictions on the amount of business interest that can be deducted for tax purposes. This limitation aims to prevent excessive interest deductions that could result in an erosion of the tax base. Businesses should be aware of this limitation and understand how it may impact their tax deductions.

Rehabilitation Credit

The rehabilitation credit is a tax incentive designed to encourage the rehabilitation of historic buildings. By investing in the preservation and restoration of historic properties, businesses can receive tax credits. These credits not only provide financial incentives but also help to preserve our cultural heritage. Businesses involved in historic building rehabilitation should explore the potential benefits of this tax credit.

For more information on these and other tax-related topics, visit the Internal Revenue Service website.