Top Small Business Tax Credits: Eligibility & How To Claim Them

Small business tax credits can reduce your tax bill, but eligibility rules vary — and not every credit applies to every business.

This guide explains how small business tax credits work and highlights common credits your business may qualify for before you file your tax return.

How Do Small Business Tax Credits Work?

A business tax credit directly reduces the amount of tax your business owes. Unlike tax deductions, which reduce your taxable income, tax credits reduce your tax liability dollar for dollar.

Depending on the credit, it may reduce the amount of tax you owe or, in some cases, be refundable or partially refundable. Many business tax credits are designed to encourage specific activities, such as offering employee benefits, investing in research and development, or improving energy efficiency.

Small Business Tax Credits

There are dozens of federal tax credits available to businesses, but not every credit applies to every business or industry. Below are some of the most common tax credits, along with a brief explanation of what they are and who may qualify.

Note: Eligibility requirements vary, and many credits have strict documentation rules.

Commercial EV Charging & Alternative Fuel Property Credit

Businesses that install qualifying alternative fuel or EV charging property may be eligible for a federal credit. Availability depends on current federal tax law and when qualifying property is placed in service.

Disabled Access Credit

Small businesses that incur expenses to improve accessibility for individuals with disabilities may qualify for this credit, subject to revenue and employee-count thresholds.

Employer Differential Wage Payments

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.

Employer-Provided Childcare Credit

Businesses that provide childcare facilities or childcare assistance for employees may qualify for this credit, subject to annual limits and documentation requirements.

Employer Social Security & Medicare Taxes on Tips Credit

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.

Investment Credit

Certain business investments — such as energy property or rehabilitation projects — may qualify for federal investment tax credits, depending on the nature of the investment.

New Markets Tax Credit (NMTC)

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.

Opportunity Zones Tax Incentives

Investments made through Qualified Opportunity Funds in designated Opportunity Zones may qualify for tax incentives designed to encourage economic development.

Paid Family Leave & Medical Leave Credit

Employers that provide qualifying paid family or medical leave under a written policy may be eligible for this credit. Requirements generally include:

• A written leave policy
• Minimum wage replacement thresholds
• Eligible leave taken during the tax year

Note: Recent legislation changed this credit. Confirm current IRS guidance before claiming it.

Research & Development (R&D) Tax Credit

Businesses that invest in research and development may be eligible for the R&D tax credit. Activities can include developing or improving:

• Products
• Processes
• Software
• Manufacturing techniques
• Eligibility depends on meeting specific IRS criteria, and documentation is required to support the credit.

If you’re unsure of what qualifies as R&D costs, consult a CPA or qualified tax professional on how to claim the R&D tax credit.

Small Employer Health Insurance Premiums Credit

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.

Small Employer Pension Plan Startup Costs

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.

Work Opportunity Tax Credit (WOTC)

The Work Opportunity Tax Credit (WOTC) is available to eligible employers that hire individuals from certain targeted groups that have historically faced barriers to employment, such as:

• Veterans
• Individuals with disabilities
• Long-term unemployed individuals
• Certain youth and public assistance recipients

Employers must meet certification and filing requirements, including submitting Form 8850. Because the WOTC has been extended and allowed to expire multiple times, verify that the credit is currently available before claiming it.

Other Industry-Specific Tax Credits For Small Businesses

Some federal tax credits apply only to businesses in specific industries, such as construction, energy, manufacturing, mining, or transportation. Examples include:

• Clean Energy Home Building Credit: Available to eligible builders that construct or substantially reconstruct qualifying energy-efficient homes.
• Carbon Dioxide Sequestration Credit (Section 45Q): Available to businesses that capture, use, or store qualified carbon oxide emissions.
• Mine Rescue Team Training Credit: Available to underground mine operators that incur qualifying training costs for certified mine rescue teams.
• Qualified Railroad Track Maintenance Credit: Available to qualifying railroad entities for eligible track maintenance expenditures.
• Advanced Energy Project Credit: Businesses with IRS-certified projects involving advanced energy manufacturing, critical materials, or industrial emissions reductions may qualify for the Section 48C credit. Businesses must apply for and receive an allocation and certification through the IRS and Department of Energy.
• Clean Fuel Production Credit: Producers of qualifying clean transportation fuel, including sustainable aviation fuel, may be eligible for the Section 45Z credit. The fuel must be produced domestically at a qualified facility, and businesses must meet IRS registration, emissions, and sale requirements.

Eligibility requirements vary widely, and many industry-specific credits require certification, government approval, or additional documentation. Review current IRS guidance or consult a CPA or qualified tax professional before claiming any specialized tax credit.

How To Claim Small Business Tax Credits

Many small business tax credits are claimed as part of the General Business Credit and reported on IRS Form 3800. However, some credits have different reporting requirements or are claimed directly on a business tax return.

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 transfer the credit amount to Form 3800, if applicable.

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 a CPA or tax professional to ensure credits are calculated and reported correctly.

Pro Tip: Tax credits directly reduce your tax liability, while tax deductions reduce your taxable income. Reviewing both can help ensure your business takes advantage of available tax benefits.

Do You Need An Accountant To Claim Business Tax Credits?

You don’t need a CPA or tax professional to claim business tax credits, but working with one can help reduce errors and ensure you’re claiming every credit your business qualifies for.

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 to your accountant for taxes or use our free small business tax checklist to stay organized during tax season.