Quick Tax Credit Calculations: Backwards and Forwards!

How many times have clients or prospects asked about tax credits, and you were caught off guard?  They may have asked: “Why should I care about tax credits?” or “How much tax credit money $$ can I get?” or “What’s it worth to me?” You may wonder if there are any quick ways to respond or any “rules of thumb” that could help when you are in the spotlight.

Well, yes there are ways to avoid the “it depends, I don’t know, let me get back to you, blah, blah” and keep them interested enough to say “tell me more.”

Here are some “back of the envelope” quick credit calculations:
  • Retraining tax credits: $1,000/employee, so 100 employees = $100,000 tax credit
  • Job tax credit: $1,000/new job, so 25 new jobs = $25,000 tax credit
  • Investment tax credits: $1 tax credit/$1,000 new fixed assets, so $10,000,000 new manufacturing plant = $100,000 tax credit
You can do this in either direction:
  • Backwards – Work backwards from your client’s Georgia income tax liability. If they have $50,000 in liability, they can utilize 50% with the Retraining Tax Credit (or $25,000). For example, if they have 25 or more employees and installed a new business-wide system, you may have an opportunity to help them with this $25,000 retraining tax credit.
  • Forwards – Work forwards from the prospect’s planned expansion. If your manufacturing prospect mentioned that they are planning a $5,000,000 plant expansion, they may benefit with your assistance with this $50,000 investment tax credit (along with a cost segregation study and other services you can provide).

A word of caution: don’t forget to temper initial enthusiasm with disclosures of “it depends, subject to, upon approval, ifs, ands and buts…”

And remember — keeping your clients and prospects interested and getting them to ask for more information are great ways to start and build your relationships!

JimSig