Tax season is a critical planning period for Texas business owners. Beyond filing returns, it is the best time to review which government programs may reduce your tax burden, identify credits you may have missed, and plan for the year ahead. This guide covers the tax credits, deductions, and government programs that Texas businesses should review during tax season.
Federal Tax Credits to Review
R&D Tax Credit
The federal R&D Tax Credit (Section 41) is one of the most underutilized credits available to Texas businesses. If your business develops new products, processes, or software, you may qualify. Qualifying activities include engineering, prototyping, testing, and software development. Startups with less than $5 million in revenue can apply credits against payroll taxes.
Work Opportunity Tax Credit
Review whether your business screened new hires for WOTC eligibility during the year. If you hired workers from qualifying target groups and filed IRS Form 8850 within 28 days of their start dates, you may claim credits of $2,400 to $9,600 per qualifying hire on your tax return.
Section 179 and Bonus Depreciation
Review equipment and asset purchases made during the year. Section 179 allows full expensing of qualifying equipment, and bonus depreciation provides additional first-year deductions. Ensure all qualifying assets are properly classified on your return.
Energy Tax Credits
Businesses that installed solar panels, energy-efficient equipment, or made qualifying energy improvements may claim the Investment Tax Credit, Energy Efficient Commercial Building Deduction (179D), or other energy-related credits.
Texas-Specific Tax Considerations
Franchise Tax Optimization
Texas businesses should review their franchise tax calculation method. Texas allows businesses to choose between the cost of goods sold method, the compensation method, the 70% of revenue method, or the $1 million revenue exemption. Choosing the right method can significantly affect your franchise tax liability.
Sales Tax Exemptions
Review whether your business has claimed all applicable sales tax exemptions, including the manufacturing exemption for equipment used in production, the Freeport Exemption for goods in transit, and industry-specific exemptions.
Property Tax Protests
Texas property tax protest deadlines typically fall in May. Review your property valuations during tax season and prepare evidence for protest if valuations exceed market value.
Credits You May Have Missed
- Disabled Access Credit: Small businesses that made ADA improvements may claim up to $5,000.
- Small Employer Health Insurance Credit: Businesses with fewer than 25 employees providing health coverage.
- Employer-Provided Childcare Credit: Businesses that operate or contract childcare for employees.
- Electric Vehicle Credits: Business fleet vehicle purchases may qualify for clean vehicle credits.
Tax Season Planning Checklist
- Review R&D activities: Document and quantify qualifying research and development.
- Compile WOTC hires: Ensure Form 8850 was filed for all qualifying new hires.
- Verify equipment deductions: Maximize Section 179 and bonus depreciation claims.
- Optimize franchise tax: Compare calculation methods to minimize Texas franchise tax.
- Check energy credits: Claim credits for energy efficiency improvements.
- Prepare for property tax protests: Review valuations before May deadlines.
Find Programs That May Fit Your Business
Tax season is the ideal time to identify government programs you may be missing. Our screening report matches your business against grants, tax credits, loans, and incentives. Start your free screening →