Archive of entries posted on January 2014

Tax Credits—Some is Better Than Others

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Unlike deductions, tax credit tax credits reduce your tax liability by dollar for dollar directly whereas tax deductions reduce your taxable income. Some tax credits can be more valuable than others.

Refundable vs. nonrefundable tax credit
Tax credits can either be refundable or non-refundable. If the tax credit were a refundable credit, it is not limited by the amount of an individual’s tax liability. When the tax credit is greater than the taxpayer’s tax liability,

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Health Saving Account for Small Business Owners

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HSA contributions for employees are usually deductible expenses for most businesses. However, HSA contributions made on behalf of Small Business Owners are subject to different rules. Sole proprietors, Partners and 2% shareholders of an S corporation are not eligible for salary reduction (Pre-tax) contributions to an HSA. The owners can establish HSAs and fund their HSAs in anyway they see fit. They can then deduct their HSA contributions on their individual tax return.

Sole proprietors
Sole proprietors can deduct the amount contributed on behalf of employees on their schedule C.

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