You don't need all the scary Halloween decorations you just need to mention the word taxes and most of us get the look of fear and dread on our faces. Since most fear is rooted in things we don't understand we thought we would try to shed a little light on the differences between a tax credit and tax deduction this month.
Let me scream this from the roof top I am not an accountant so you will need to talk to your accountant to make sure you qualify and that you get the most benefit possible from these two categories.
Most doctor's purchase equipment and use the tax deduction and think it is the same as the tax credit but these two things are as different as a werewolf and a vampire.
A tax deduction is when you incur a valid business expense. This expense is subtracted from your business revenue to determine your profit, which is the amount against what you are taxed.
A tax credit can be considered more valuable because it directly offsets against tax that you owe. So if you owe 5000.00 in taxes and you have a 3000.00 tax credit you only have to write a check for 2000.00 instead of 5000.00. See how nice that can work in your favor?
At the time of this blog the three main criteria's that must be met to qualify for the ADA tax credit are
1. Your business may not have more than 30 full time employees in the preceding year.
2. Your business gross receipts may not exceed one million from the preceding year.
3. Your business must purchase equipment that allow patients with disabilities access to care. Most chiropractic tables with high low or elevation features qualify. In the biophysics world there aren't high low tables offered but the Omni Elevation Table and the MT Bio 200 Table's do meet the requirements for the tax credit.
Figuring out the credit is easily calculated on IRS Form 8826. I know I said easily and tax form in the same sentence but it really is an easy form. You will take the cost of the qualifying equipment subtract 250.00 then multiply by 50% and that is the amount up to 5000.00 that you are able to apply as your credit.
Final things to keep in mind are that the max amount of the credit is 5000.00, purchases need to be made during the calendar tax year and that we are NOT your accountant so verify your eligibility with your personal accountant.
There now that's more of a treat than a trick!