If you are a minority and you own a business, then your business is considered to be a minority-owned business. There is a designation to this for several reasons that relate to taxes. For example, if someone wants to make in indirect investment in your business, they can receive credit for that investment on their income taxes because it’s considered community development.
While others may benefit from doing business with your business, are there any benefits for you? It depends.
Economically Distressed Locations
To qualify for a tax credit for locating your business in a distressed area, your minority-owned business must first be qualified. These distressed areas are known as empowerment zones, because you are empowering the people that live there.
For employing people in these zones, you’ll get a credit of $3,000 per employee. You can also write off up to $35,000 in equipment expenses.
Indian Reservations
Hiring people who live on or near a reservation can put a little extra money in your pocket. For each person you hire, you get a tax credit of 20 percent of their qualified wages up to the first $20,000. You also get accelerated depreciation on your equipment and other property if it is considered to be reservation property.
DC Enterprise Zone
Like operating a business in an empowerment zone, if you operate a business in a DC enterprise zone you’ll receive a credit for each employee hired in that zone, plus get equipment write offs.
New Markets Credit
This is the credit discussed earlier. When an investor makes an indirect investment in a minority-owned business, it is also beneficial to the minority-owned business. After all, an investment is money coming in. These funds make the small business stronger.
These tax credits drive business to minority-led businesses that might have otherwise been overlooked. By creating jobs in distressed communities and investing funds in minority-led businesses, these businesses become stronger and the people who associate with these businesses gain financial stability.
It’s long been known that poverty is rampant on Indian reservations. By promoting tax credits for hiring Native American workers, it gives this group of people who are typically disadvantaged a chance at success.
Whether you are a minority business owner or not, each of these tax breaks has something to offer to help your business succeed. It’s a win-win situation for everyone involved. The next time you’re considering opening a new business, find out the latest locations HUD has designated to be distressed. Everyone involved will benefit.