San Jose Enterprise Zone Tax Credits
California’s Enterprise Zone program was established in 1984 to stimulate business investment in California. San Jose’s Enterprise Zone is a 12-square mile area in the heart of Silicon Valley, and businesses located in the enterprise zone are eligible for significant tax credits and tax deductions. The San Jose Enterprise Zone is located between the 101 and 87 freeways and stretches all the way down from North San Jose to Tully Road. The San Jose Enterprise Zone is approximately 10 sq. miles and includes most of Downtown San Jose.
The San Jose Enterprise Zone is very beneficial to local businesses and it is worth up to $37,440 per qualified employee. Current and past employees can qualify for the Enterprise Zone Tax Credit program in one of 13 different ways as long as they work inside the boundary of the San Jose Enterprise Zone. Businesses may claim the enterprise zone tax credits on wages paid to those employees for five years. In the first year, a company can claim 50% of an employee’s wage. The company can claim 40% in the second year, 30% in the third year, 20% in the fourth year, and 10% in the fifth year. There is a maximum wage allowance of 150% of the current minimum wage rate, as established by the Industrial Welfare Commission. As the minimum wage increases so does your tax credit.
How do I know if my business qualifies?
» To see if your business qualifies, fill out the Enterprise Zone eligibility form
Business in the San Jose Enterprise Zone may also qualify for the following incentives:
Hiring Tax Credit: Employers who hire workers in the Zone may qualify for a tax benefit. Each eligible employee may be worth up to $37,440 in Enterprise Zone tax credits. This tax credit is intended to encourage businesses to hire employees facing barriers to employment.
Sales and Use Tax Credit: Businesses within the Zone can receive a tax credit on qualified equipment. A company that lies within the Zone can utilize the sales and use tax credit. Business purchasing equipment that is technology-based or used for manufacturing can recover the sales paid on that equipment.
Business Expense Deduction: Accelerated depreciation is available for tangible personal property purchased by a business in the Zone. Many businesses may reduce their California tax liability by using this deduction.
Net Interest Deduction:Lenders may qualify to earn tax-free interest on loans if lending to the Enterprise Zone. Banks or private lenders will not pay California tax on loans to businesses within the Zone. This encourages banks to lend within the Zone.