Maximizing The Benefits of General Business Tax Credits

The following article, Maximizing the benefits of general business tax credits, originally appeared in the May 2022 issue of The Tax Adviser.

General business credits can provide significant tax benefits in the form of a dollar-for-dollar reduction to tax liability for individuals and corporate taxpayers alike. These credits, enumerated in Sec. 38(b), can be generated by a broad range of business activities ranging from hiring certain classes of employees (i.e., the work opportunity, Indian employment, and empowerment zone employment credits) to utilizing certain resources in the manufacturing process (the renewable electricity production credit, for example). Many taxpayers develop a surplus of credits that are at risk of going unused. This item discusses how excess credits might arise and how tax practitioners can help their clients convert certain credits that would otherwise go unused into a tax deduction.

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