State Tax Credits

State Tax Credits

April 26, 2022 by investor

State Tax Credits

Many states offer tax credits for startup investments.

Those states with a state income tax will reduce your capital gains tax burden.

The typical requirements are as follows:

1. The business must be a C-Corp or an LLC entity.
2. The entity was organized no more than 3 years before the investment.
3. It must have less than $500K of revenue.
4. You must hold some operations of the business within the state.
5. The business must have at least two full-time employees, but less than 20 total employees.
6. The business must be a growth startup that excludes restaurants, retail, and other lifestyle businesses.
7. The business must be able to increase jobs in the area for some number of years after investment.
8. You cannot have more than $10M in assets.

Each state has a unique set of rules but most follow these guidelines. 

Check your state’s website for applicable laws regarding tax breaks for startup investments.

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.