For many small businesses, managing taxes can be confusing—especially at a time when rising costs and tighter margins make every dollar count. As a result, many small business owners overlook valuable credits that could provide them with significant financial relief.
Below, we break down several commonly missed credits that may help reduce your tax burden this year.
What’s the difference between a tax credit and a tax deduction?
A tax deduction is an amount you can subtract from your income, reducing how much of it is subject to tax—and, in some cases, lowering your tax bracket. A tax credit is more straightforward, as it reduces the amount of tax owed by giving you a dollar-for-dollar reduction in your liability. For instance, a $500 tax credit will lower your bill by $500.
Too often, business owners focus exclusively on deductions and overlook equally valuable credits. However, when your business meets the eligibility criteria, both can provide substantial tax savings.
Tax credits commonly missed by small businesses
Make sure your small business takes advantage of these often-missed tax credits that may apply to you.
Work Opportunity Tax Credit
The Work Opportunity Tax Credit (WOTC) is a federal tax credit that provides relief to businesses that employ individuals facing barriers to employment. The credit offers $2,400 to $9,600 per eligible new hire, with targeted groups across categories including qualified Welfare, Supplemental Nutrition Assistance Program (SNAP), and Temporary Assistance for Needy Families (TANF) recipients; veterans; ex-felons; and others.
The value of the credit depends on the employee's target group and their earned wages during their first year of employment. To qualify, employees must work at least 120 hours (maximum credit available at 400 hours). Typically, the credit covers 40% of an employee’s qualified first-year wages, or 25% if they work fewer than 400 hours.
Although the program expires on December 31, 2025, it’s still worthwhile to claim the WOTC for potential savings this tax season. Employers must first complete Form 8850 to prescreen the new hire and request certification from their state workforce agency. Once the employee is certified, employers can use Form 5884 to claim the credit for eligible hires made before the 2025 deadline.
R&D tax credit
The R&D tax credit offers a tax liability reduction opportunity to businesses innovating a process or product. The tax credit is available to businesses of all sizes for qualifying research activities, including software development, architectural design, product enhancements, and more. Businesses can also be eligible for this tax credit for qualifying basic research payments, though this is less common.
To claim the R&D tax credit, you’ll need to file Form 6765, Credit for Increasing Research Activities, with your federal tax return. You’ll also need relevant records for each business component (e.g., R&D project) and the related qualified research activities and expenses. Small businesses that meet the IRS’s gross-receipts eligibility guidelines can also use this credit to offset their payroll tax liability, up to $500,000.
[Read more: How to Qualify for and Claim the R&D Tax Credit]
SECURE 2.0 Act
The SECURE 2.0 Act of 2022 expanded the Small Employer Pension Plan Startup Credit introduced in 2019. Under SECURE 2.0, eligible employers with 50 or fewer employees can now receive a credit up to 100% of qualified startup costs for the first three years of a new retirement plan. This credit helps offset the setup and administrative expenses for 401(k)s, SIMPLE IRAs, and similar plans.
Separately, small businesses that add automatic enrollment to a new or existing retirement plan will receive a $500 tax credit per year, for up to three years. You can claim both of these credits with Form 8881.
The IRS’s General Business Credit is a collection of 30 business credits designed to support small businesses.
Additional tax credits small businesses can take advantage of
Here are a few more tax credits that may benefit you as a small business owner.
Small Business Health Care Tax Credit
The Small Business Health Care Tax Credit is designed to help small businesses afford employee health insurance. To qualify, you must have fewer than 25 full-time equivalent employees, pay average wages below the annual inflation-adjusted limit, and offer a qualifying SHOP Marketplace plan that covers at least 50% of employee-only premiums.
The credit covers up to 50% of premiums paid (35% for tax-exempt employers), which you can claim for two consecutive years; if you have fewer employees or lower average wages, you may qualify for a larger credit. You can deduct any premium costs that exceed the credit as a business expense, and unused credits can carryover forward or back.
To claim the Small Business Health Care Tax Credit on your federal tax return, you’ll need to file Form 8941, Credit for Small Employer Health Insurance Premiums, as well as report the credit on Form 3800, General Business Credit. (Tax-exempt businesses should claim the credit on Form 990-T, Exempt Organization Business Income Tax Return, even if they don’t typically file this form.)
Employer Credit for Paid Family and Medical Leave
Businesses that provide qualifying paid leave to employees may be eligible for the Employer Credit for Paid Family and Medical Leave. To qualify, employers must have a written policy that offers at least two weeks of paid family and medical leave annually, with a minimum 50% wage replacement, to employees who meet the Family and Medical Leave Act (FMLA) requirements.
Using Form 8994, employers can claim 12.5% to 25% of wages paid, depending on the wage-replacement percentage provided, for up to 12 weeks per eligible employee. The One Big Beautiful Bill Act (OBBBA) made this temporary credit permanent in July 2025. Additional enhancements to the credit will be available starting in tax year 2026 and beyond.
[Read more: Employee Benefits Tax Deductions: Guide for Business Owners]
New Markets Tax Credit (NMTC)
This tax credit helps revitalize struggling economies by offering a 39% tax credit over seven years to private investors who fund community development entities in low-income communities. It can be claimed using Form 8874.
The New Markets Tax Credit was also made permanent as part of the OBBBA, and in December 2025, the Treasury Department announced changes to NMTC allocations that “reflect a 20% increase in investments in rural and non-metro communities.”
Empowerment Zone Employment Credit
With this tax credit, businesses in empowerment zones, or distressed areas, that hire and retain employees in that area can claim up to $3,000 per employee. The empowerment zone designations have been extended through December 31, 2025, meaning the credit can be claimed for the 2025 tax year using Form 8844.
General Business Credit
The IRS’s General Business Credit is a collection of 30 business credits designed to support small businesses. The various tax credits aim to incentivize specific business activities, such as investing in renewable energy, hiring certain workers, or conducting research and development. Rather than a single credit, it combines multiple credits into a single amount to offset a company’s total tax liability. Eligibility will depend on the specifications of each credit.
Businesses can claim these credits by using Form 3800 and additional forms specific to the credit(s) you wish to claim. Unused portions of the credit can often be carried back one year or forward up to 20 years.
Consult with your accountant to see which of these credits you qualify for and make sure you’re not leaving any money on the table this tax season.
[Read more: 3 Questions to Ask Your Accountant Before Filing Taxes]
Jamie Johnson, Emily Heaslip, and Lauren Kubiak contributed to this article.
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