Deductions and tax credits are both money saving opportunities for individuals, small businesses, and employers alike, but which of the two are most beneficial to your specific business. We’ve compiled a small list of resources that can help you determine where the most savings can come from.

A deduction is an expense or an amount of money which lowers your taxable income. Examples of deductions include contributions to a traditional IRA, student loan interest that was paid during the year, tuition and expenses, alimony paid, and classroom-related costs for teachers. There are also deductions that are related to self-employment income. The standard or itemized deductions are subtracted from the AGI, yielding your taxable income. This is the number which determines the amount of tax that you owe.

Tax credits, on the other hand, are dollar-for-dollar reductions which are subtracted from your tax liability.

For more detailed information on deductions and credits:

http://web.finweb.com/taxes/deductions-vs-credits.html

As an employer, you may be eligible for some money saving tax credits, but to know if you are, if you have to get informed:

If you pay $50,000 a year toward workers’ health care premiums – and if you qualify for a 15 percent credit, you save … $7,500. If you save $7,500 a year from tax year 2010 through 2013, that’s total savings of $30,000. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $12,000 a year.

Even if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

Try this Small Business Health Care Tax Credit Modeling Tool to get an idea for the amount of tax credit you could receive as an employer:

http://www.uhc.com/live/uhc_com/Assets/Documents/taxtool.html

Can you claim the credit?

To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs). Those employees must have average wages of less than $50,000 a year.

For a full description on all eligibility requirement, more general information, and to find the forms you need to claim the credit, view the following page:

http://www.irs.gov/newsroom/article/0,,id=223666,00.html