20 Tax Credits Available for Small Business Owners

Small business tax credits are powerful money-saving tools that reward you for hiring employees, going green, offering benefits, and investing in innovation—helping you keep more cash in your business while fueling growth!

Alyana Aguja
March 27, 2025
6 min read

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Small business tax credits are a game-changer, enabling entrepreneurs to cut their tax bills while investing in growth, employees, and sustainability. From rewarding job creation and innovation to funding healthcare and green initiatives, these credits put real money back into business owners’ pockets. Knowing and claiming the right tax credits can mean the difference between just surviving and truly thriving in today’s competitive market.

1. Small Business Health Care Tax Credit

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If you offer health coverage to your employees, you might be eligible for a credit of up to 50% of the premium paid. This is for companies with 25 or fewer full-time employees with an average annual wage of less than $61,400 (as of 2024). To be eligible, you must buy coverage through the Small Business Health Options Program (SHOP).

2. Work Opportunity Tax Credit (WOTC)

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Hire workers from some disadvantaged groups, and you may receive a tax credit of up to $9,600 per worker. Eligible workers include veterans, the long-term unemployed, and former felons. The amount of credit varies with the worker’s wages and hours worked.

3. Research and Development (R&D) Tax Credit

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If your company invests in creating new products, processes, or software, you may be eligible for the R&D credit. Startups with less than $5 million in revenue can even apply the credit against payroll taxes. It aids innovative companies to reinvest in growth.

4. Disabled Access Credit

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Small companies that incur expenses making their buildings accessible for individuals with disabilities can receive a credit of up to $5,000. Qualified costs include the addition of ramps, changing bathrooms, and offering assistive technology. This is available for companies with less than $1,000,000 in annual revenues or fewer than 30 full-time employees.

5. Employer-Provided Childcare Credit

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If your company provides childcare assistance or assists employees in paying for childcare, you can claim a tax credit of up to 25% of eligible expenses. This is for expenses on-site at a childcare facility or contracts with third-party providers. The top credit is $150,000 annually.

6. New Markets Tax Credit (NMTC)

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If you invest in low-income communities in businesses or projects, you could get a tax credit of up to 39% of your investment over seven years. It stimulates economic growth in low-income communities. Businesses can apply through the Community Development Financial Institutions (CDFI) Fund.

7. Retirement Plan Startup Credit

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Small employers who establish a 401(k) or SIMPLE IRA plan are eligible for a credit of up to $5,000 over three years. This will help with the plan’s fund setup and administrative fees. If you install automatic enrollment, you can add another $500 a year.

8. Energy-Efficient Commercial Building Deduction (Section 179D)

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If your company installs energy-efficient upgrades in its buildings, you may qualify for a tax credit of up to $5 per square foot. Upgrades that qualify are improved HVAC systems, lighting, and insulation. The credit rewards sustainability while saving on utility bills.

9. Paid Family and Medical Leave Credit

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Employers who offer paid family and medical leave to employees can be eligible for a 25% credit of wages paid. The leave should be at least two weeks and provide at least 50% of the employee’s normal wages. This credit promotes businesses with improved work-life balance.

10. Employee Retention Credit (ERC)

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If your company was impacted by COVID-19 and maintained employees on payroll, you could still be eligible for a credit of up to $26,000 per worker. The ERC reimburses wages paid during shutdowns or sharp revenue drops. Companies must qualify based on 2020-2021 revenue loss or government orders.

11. Low-Income Housing Tax Credit (LIHTC)

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Companies that invest in low-cost housing projects can take advantage of this federal tax credit. The credit is based on project expense and rental affordability and is intended to promote the rehabilitation and construction of low-income housing.

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Restaurants and enterprises whose employees get tips can recover credit for the employer’s portion of Social Security and Medicare taxes on tipped income. This alleviates hospitality companies’ payroll tax burdens. The credit applies only if tipped workers earn not less than minimum wage.

13. Alternative Fuel Vehicle Refueling Property Credit

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Businesses installing electric vehicle (EV) charging stations can receive a credit of 30% of installation costs, up to $100,000 per location. This credit encourages investment in sustainable infrastructure and applies to businesses, nonprofits, and local governments.

14. Self-Employed Health Insurance Deduction

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If you are self-employed and purchase your health coverage, you can deduct 100% of the cost of premiums paid. This is for your and your family’s medical, dental, and long-term care insurance. It’s deductible even if you don’t itemize deductions.

15. Small Employer Auto-Enrollment Credit

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Firms that use automatic enrollment in retirement plans can be given a tax credit of $500 for three years. It is a part of the Retirement Plan Startup Credit. It helps more employees save for retirement.

16. Biofuel Producer Tax Credit

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Companies manufacturing renewable biofuels such as biodiesel and ethanol may be eligible for tax credits based on production quantities. The amount of credit depends on the nature of the fuel produced. This promotes sustainable energy manufacturing.

17. Employer-Provided Educational Assistance Credit

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Companies that help workers pay for college or training courses can deduct a maximum of $5,250 per worker per year. This includes tuition, fees, and course materials. It’s an excellent way to invest in employee development and retention.

18. Small Business Carbon Capture Credit (Section 45Q)

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If your company sequesters and stores carbon emissions, you could earn up to $50 per ton of carbon dioxide that you store. This is for companies cutting back on their impact on the environment. The credit incentivizes reducing carbon.

19. Credit for Small Employer Pension Plan Contributions

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If you contribute to employee pension plans, you can receive a credit for a portion of these contributions. This is for firms with fewer than 100 employees. The amount of the credit varies based on contribution rates and employee enrollment.

20. State-Specific Tax Credits

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Some states also offer supplemental tax credits for research, hiring, or investments in renewable energy. For instance, California’s New Employment Credit encourages employment in specific areas. Consult your state tax agency for local incentives.