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Learn how small business tax credits work, who qualifies, and which credits may apply to your business.
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Editor & Senior Staff Writer
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Tax credits can reduce what your business owes, but eligibility rules vary — and not every credit applies to every business.
This guide breaks down common small business tax credits, explaining what they are, who qualifies, and how they work so you can identify potential opportunities before filing.
Table of Contents
A business tax credit directly reduces the amount of tax your business owes. Unlike tax deductions, which lower taxable income, tax credits reduce your tax liability dollar for dollar.
Depending on the credit, it may reduce the amount you owe when filing or, in some cases, result in a refund. Business tax credits are typically offered to encourage specific activities, such as providing employee benefits, investing in research and development, or adopting energy-efficient or environmentally friendly practices.
There are dozens of tax credits available to businesses, but not every credit applies to every situation. Below is a list of common and niche small business tax credits, along with a brief explanation of what each credit is and who it may apply to.
Note: Eligibility requirements vary, and many credits have strict documentation rules.
Businesses that invest in research and development may be eligible for the R&D tax credit. Activities can include developing or improving:
If you’re unsure of what qualifies as R&D costs, consult with your accountant for how to claim the R&D tax credit or work with a trusted R&D company to file for this tax credit on your behalf.
The Work Opportunity Tax Credit is available to employers that hire individuals from certain targeted groups that face barriers to employment, such as:
Employers must meet certification and filing requirements, including submitting Form 8850.
Note: Under current law, WOTC applies to eligible new hires who begin work on or before December 31, 2025.
Eligible small employers that provide health insurance to employees may qualify for a credit covering a portion of employer-paid premiums. Eligibility depends on business size, employee wages, and plan structure.
Employers that provide qualifying paid family or medical leave under a written policy may be eligible for this credit. Requirements generally include:
Note: Recent legislation changed this credit effective for tax years beginning in 2026; confirm current IRS guidance and eligibility details before claiming.
Businesses that provide childcare facilities or childcare assistance for employees may qualify for this credit, subject to annual limits and documentation requirements.
Businesses in industries where tipping is customary may claim a credit for the employer-paid portion of Social Security and Medicare taxes on qualifying employee tips.
Small businesses that incur expenses to improve accessibility for individuals with disabilities may qualify for this credit, subject to revenue and employee-count thresholds.
Employers that establish qualifying retirement plans may be eligible for credits to offset startup and administrative costs during the first several years of the plan.
Businesses that install qualifying alternative fuel or EV charging property may be eligible for a federal credit. The credit generally isn’t available for property placed in service after June 30, 2026.
Employers that make qualifying differential wage payments to employees on active military duty may be eligible for a credit equal to a percentage of those payments.
Certain business investments — such as energy property or rehabilitation projects — may qualify for federal investment tax credits, depending on the nature of the investment.
Businesses that invest in low-income communities through certified Community Development Entities may be eligible for the New Markets Tax Credit, which is claimed over multiple years.
Investments made through Qualified Opportunity Funds in designated Opportunity Zones may qualify for tax incentives designed to encourage economic development.
Some tax credits apply only to businesses operating in specific industries, such as construction, energy, manufacturing, mining, or transportation. These industry-specific tax credits include:
Availability and eligibility requirements vary significantly by industry, and many of these credits are subject to certification, approval, or phase-out rules. Businesses should review current IRS guidance or consult a tax professional before claiming any industry-specific credit.
Many small business tax credits are claimed as part of the General Business Credit, which is reported using IRS Form 3800.
Each individual tax credit has its own dedicated form. To claim a credit, you first complete the specific form associated with that credit (for example, the Disabled Access Credit is calculated on Form 8826). You then report the calculated credit amount on the appropriate line of Form 3800.
If your business qualifies for multiple credits, you’ll repeat this process for each eligible credit, list them on Form 3800, and follow the IRS instructions to calculate your total allowable business tax credits.
Because eligibility rules, limitations, and carryforward rules can vary by credit, many businesses work with an accountant or tax professional to ensure credits are calculated and reported correctly.
Pro Tip: Tax credits reduce tax liability directly, while tax deductions reduce taxable income. Reviewing both credits and deductions together can help ensure your business doesn’t overlook available tax benefits.
You don’t need an accountant to file small business taxes or claim tax credits, but working with a certified public accountant (CPA) or qualified tax preparer can help reduce errors and ensure credits are claimed correctly.
Business tax credits often come with detailed eligibility rules, documentation requirements, and filing limitations. A tax professional can help you determine which credits apply to your business and ensure they’re calculated and reported properly.
To make the process easier, keep detailed records of qualifying expenses, investments, and payroll activity throughout the year. You can also review our guide on what information to bring your accountant for taxes or use our free small business tax checklist to stay organized during tax season.
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