Georgia Navigator Practice Exam

What average annual wage limit must a small employer not exceed to be eligible for the small business tax credit?

1. Minimum wage

2. A federally determined limit

3. 75% of state average wages

4. No limit applies

The correct answer is: A federally determined limit

To be eligible for the small business tax credit, a small employer must not exceed a federally determined limit for average annual wages. This limit is set by the federal government and is designed to ensure that the tax benefits provided to small businesses are targeted toward those employers who are typically in a smaller income bracket, offering compensation that falls within a certain range. This criterion is crucial as it helps to define what constitutes a "small" employer for the purposes of the tax credit, ensuring that the resources allocated for such credits effectively support smaller businesses rather than larger enterprises that may not need the same level of financial assistance. The options related to minimum wage, state average wages, or no limits do not accurately reflect the criteria set forth by federal guidelines that govern the eligibility for this tax credit, thereby making the federally determined limit the correct answer.