7 Tax Credits Small Business Owners Need to Know About

A spoonful of credits makes the tax bill go down.

One of the most complicated parts of running a small business is figuring out your taxes. Most business owners are worried about ensuring they pay enough taxes. However, you should also spend a little time figuring out if you're paying too much in taxes.

There are a ton of ways you can reduce how much your business pays in taxes. Tax deductions, for instance, reduce the amount of income you're taxed on. Tax credits, on the other hand, reduce your actual tax bill.

Some of the best small business tax credits are about recouping some of what you spend to keep your employees happy. But there are also tax credits based on how your company operates. Here are some of the notable tax credits for small businesses.

READ MORE: The Top Tax Software for Small Businesses

1. Health insurance premium credit

If you have a small business but still provide your employees with health insurance, you may qualify for this credit. It can reimburse your business for up to 50% of employer-paid insurance premiums -- no small discount. That said, how large of a credit your business can qualify for will depend on a variety of factors, including how many full-time employees (or full-time equivalent employees) you have, their average salary, and the amount you've paid in premiums.

File: Tax Form 8941

2. Pension plan startup costs credit

Another benefits-related credit, your business may be eligible for a tax credit if you start up a pension/retirement plan. The credit applies to the cost of setting up the plan, as well as educating your employees about it. Only businesses with 100 or fewer employees will qualify, and you can't have started a similar program within the last three years.

File: Tax Form 8881

3. Employer-provided childcare credit

Small businesses that help employees with childcare are eligible for credits toward the costs. Businesses that build and staff their own employee childcare facilities, as well as those that contract with outside facilities, can deduct 25% of qualified costs. There is also a 10% credit for the qualified resource and referral expenditures.

File: Tax Form 8882

4. Paid family and medical leave credit

This credit is designed to encourage employers to provide paid family and medical leave to their employees. It's worth 12.5% of the wages paid to employees on qualifying family or medical leave throughout the tax year if you paid out at least 50% of their wages during the leave period. Paying out more increases your credit, with a maximum credit of 25% of paid wages if you paid 100% of the employee's salary during their qualifying leave.

File: Tax Form 8994

5. Work opportunity credit

Being an equal opportunity employer isn't just about being altruistic. Businesses that hire employees from specific underserved populations can qualify for a tax credit of up to $2,400 (40% of the first $6,000 of the employee's first-year wages). The list of eligible employees includes a variety of backgrounds, including people formerly incarcerated or convicted of a felony, people who receive SSI (supplemental security income) or family assistance, and people who have been unemployed long-term. There may be additional credits for hiring a qualified veteran.

File: Tax Form 5884

6. Disabled access credit

Making your business more accessible is not just the right thing to do; it can also earn your small business a tax credit. The credit can cover up to half your costs with a maximum of $5,000 in credits each year. Qualifying expenditures include a wide range of accessibility improvements, such as hiring interpreters, purchasing equipment, and modifying your property.

File: Tax Form 8826

7. Plug-in electric vehicle credit

Is your business considering going electric? You may be eligible for a tax credit for any plug-in electric drive vehicles you put into service. The vehicle must meet specific criteria -- such as possessing a minimum 4 kWh battery -- to qualify, and certain brands (Tesla and GM) are excluded. The amount of credit you're eligible for will vary based on the make, model, and use conditions.

File: Tax Form 8936

When in doubt, hire somebody

How easy or difficult it is to qualify for a given tax credit varies a lot, both on the credit and your business. If you're at all unsure as to whether your business qualifies, or how much to claim, consult a tax professional. It's better to get help upfront than to wind up in hot water with the IRS later.