Burkland Brief:

  • Tax credits reduce taxes owed dollar-for-dollar; deductions only reduce taxable income.
  • Many businesses qualify for tax credits they never claim, simply because no one identifies them during the year.
  • The R&D tax credit is one of the most valuable credits for growing, product-driven businesses.
  • Hiring, benefits, and energy credits often hinge on timing and documentation.
  • The best results come from planning for credits well before year-end.

Small businesses spend a lot of time focused on deductions, but credits are often the bigger lever.

  • A deduction lowers your taxable income. If you’re in a 30% combined tax bracket, a $10,000 deduction saves about $3,000.
  • A tax credit lowers your tax bill directly. A $10,000 credit usually saves $10,000.

That difference is why credits are so valuable.

The catch? Most tax credits require planning, documentation, and specific elections. Miss those, and the savings disappear. Credits don’t show up automatically. They don’t appear because you “spent money” or “did the right thing.” They show up when someone knows what to look for, asks the right questions, and files the right forms.

This article highlights seven tax credits we see business owners and finance leaders benefit from most often.

1. Small Business Health Care Tax Credit

Health insurance is expensive. This credit can offset part of that cost, but only for smaller teams that meet specific thresholds.

Generally, this credit applies if you:

  • Have fewer than 25 full-time equivalent employees
  • Pay at least 50% of employee-only premiums
  • Pay an average employee salary below a certain threshold, inflation-adjusted annually (less than $65,000 in tax year 2025)
  • Offer coverage through the SHOP Marketplace

The credit can be worth up to 50% of premiums paid, but it’s limited to two consecutive years.

The Small Business Health Care Tax Credit can be meaningful early on, but it phases out quickly as teams grow. It’s worth checking into, but it’s not a long-term benefit for most scaling businesses.

2. Retirement Plan Startup Costs and Employer Credits

Retirement plans help with hiring and retention, but cost is often a blocker. The IRS offers several tax credits that materially reduce both the upfront and early-year cost of starting and funding a plan. For many small and mid-sized businesses, these credits can change the economics enough to make a plan viable sooner than expected.

The startup costs credit (up to $5,000 per year)

If you start a 401(k), SEP, or SIMPLE IRA, you may be eligible for a tax credit of up to $5,000 per year for up to three years to offset plan setup, administration, and employee education costs.

At a high level, you may qualify if:

  • You had 100 or fewer employees earning at least $5,000 in the prior year
  • At least one participant is a non-highly compensated employee
  • You didn’t sponsor a similar plan for substantially the same employees in recent years

Smaller employers benefit more:

  • Businesses with 50 or fewer employees can generally claim 100% of eligible startup costs, subject to annual caps
  • Businesses with 51–100 employees can generally claim 50% of eligible startup costs, with the same caps

One important nuance: you can’t deduct these costs and claim the credit for the same expenses. In most cases, the credit is the better option.

The employer contribution credit (where the real leverage is)

In addition to startup costs, small employers may also claim a separate tax credit for employer contributions to the retirement plan.

This credit:

  • Applies on a per-employee basis
  • Can be available for up to five years
  • Is capped at $1,000 per employee per year
  • Phases down over time and varies based on employer size

For many small businesses, this credit significantly reduces the net cost of offering employer matches in the early years of a plan.

Additional credits worth knowing about

Two smaller but often overlooked credits can stack on top:

  • Auto-enrollment credit: Employers that add an eligible auto-enrollment feature can claim $500 per year for three years, even for existing plans.
  • Military spouse credit: Employers that hire eligible military spouses and meet accelerated vesting and eligibility rules may claim up to $500 per year per spouse for up to three years.

Retirement plan credits are easy to underestimate because they’re spread across multiple years and forms. In practice, they can offset a meaningful portion of both setup costs and early employer contributions, especially for businesses with fewer than 50 employees.

The biggest wins come from structuring the plan correctly from the start and coordinating benefits decisions with tax planning. If you wait until the return is being prepared, you’re often leaving value on the table.

3. R&D Tax Credit (Payroll Tax Offset)

This is often the largest tax credit available to growing businesses, and one of the most misunderstood.

You don’t need a lab. If your team is building, improving, or reworking products, software, systems, or processes—and there’s technical uncertainty involved—you may have qualifying R&D.

We regularly see this apply to:

  • Wages for engineers, developers, and technical leadership
  • Employer-paid payroll taxes on qualifying wages
  • Certain contractor costs, when properly structured
  • Supplies used in the development or testing process
  • Software and SaaS companies
  • Manufacturers improving production processes
  • Hardware, robotics, biotech, and engineering-driven teams
  • Companies building internal tools that solve technical problems

If you’re a qualified small business, you may be able to use up to $500,000 of R&D credits to offset payroll taxes. To qualify for the payroll tax offset, the business must meet the Qualified Small Business definition, including having less than $5 million in gross receipts for the credit year and no gross receipts more than five years prior.

The election has to be made correctly and on time, using Form 6765, with the payroll portion reported on Form 8974. Miss the election window, and the payroll benefit is gone for that year.

For tax years beginning after 2021, research costs are also subject to capitalization and amortization under Internal Revenue Code Section 174. As a result, R&D credit studies must be coordinated with Section 174 treatment to ensure costs are properly identified, supported, and consistently reported.

If you have engineers, developers, or technical staff on payroll, this credit is worth a serious look. The biggest mistakes happen when teams attempt to recreate documentation after year-end instead of contemporaneously tracking projects, technical uncertainty, and employee involvement.

This is an area where a targeted review can uncover meaningful savings. Contact Burkland to request a 2025 R&D Tax Credit and Section 174 review for your business.

4. Paid Family and Medical Leave Tax Credit (Now Permanent)

If you already offer paid parental or medical leave—or you’re considering it—this credit can offset a meaningful portion of the cost. For years, many businesses ignored it because it was temporary and somewhat technical. That changed in 2025 with the passage of the One Big Beautiful Bill Act (OBBBA), which made the credit permanent.

This is no longer a “use it while it lasts” credit. It’s now a long-term planning tool for businesses that want to offer paid leave in a structured, tax-efficient way.

Under Internal Revenue Code Section 45S, eligible employers may claim a general business tax credit based on wages paid to qualifying employees while they’re on paid family or medical leave.

What counts as “family and medical leave”

This credit is narrowly defined. Qualifying leave includes time off for:

  • Birth of a child and care for the child
  • Adoption or foster placement
  • Caring for a spouse, child, or parent with a serious health condition
  • The employee’s own serious health condition
  • Certain military-related caregiving or exigency situations

Importantly, paid vacation, sick leave, or personal leave does not qualify, unless it’s specifically designated for one of these purposes.

The credit applies to up to 12 weeks of leave per employee per year, and is calculated as a percentage of wages paid during leave.

To claim the credit, employers must have a written paid family and medical leave policy in place that meets specific requirements, including:

  • At least two weeks of paid leave per year for full-time employees (prorated for part-time employees)
  • Pay during leave of at least 50% of the employee’s normal wages
  • The policy must be adopted and effective before the leave is taken

Qualifying employees must:

  • Have been employed for at least one year
  • Earn no more than the annual compensation threshold. For leave taken in 2026, the employee’s compensation in 2025 must not have exceeded $96,000

5. Disabled Access Credit

Accessibility improvements often get treated as pure compliance costs. The Disabled Access Credit helps offset those expenses and is one of the few credits that can apply repeatedly if you continue making qualifying improvements.

The credit applies to qualified access expenditures that improve accessibility for individuals with disabilities. These can include:

  • Physical modifications to facilities
  • Changes that improve access to goods or services
  • Certain equipment or communication accommodations

You’re considered an eligible small business if, in the previous year, your business:

  • Earned $1 million or less in gross receipts, or
  • Had no more than 30 full-time employees

Meeting either threshold is sufficient.

The credit equals 50% of eligible expenses that exceed $250, up to $10,250 in a year. That puts the maximum annual credit at $5,000.

You can generally claim the credit in any year you incur qualifying expenses, not just once.

If you’re upgrading a space, opening a new location, or improving customer access, this credit is worth checking before you write off the cost as “just compliance.” The key is making sure expenses are clearly tied to accessibility and properly documented so they hold up if reviewed.

6. FICA Tip Credit

For restaurants, bars, and other tipped-wage businesses, payroll taxes on tips can quietly add up. The FICA Tip Credit helps offset that cost by allowing eligible employers to recover a portion of the employer-side Social Security and Medicare taxes paid on certain employee tips.

In practical terms, if your employees report tips and those tips are subject to payroll tax, a portion of the employer-paid tax may be creditable.

For the right business, this credit can be one of the most consistently valuable credits available year after year.

The amount of the credit depends on:

  • Total reported tips subject to FICA
  • Proper allocation of wages up to the federal minimum wage
  • Accurate payroll tax reporting

There’s no fixed dollar cap, which means the credit scales with your tipped payroll.

If tipping is part of your compensation model, the FICA Tip Credit shouldn’t be an afterthought. It rewards businesses that run disciplined payroll and tip-reporting processes.

7. Clean Electricity Investment Credit

For businesses with high, predictable energy usage, clean energy projects can meaningfully reduce long-term operating costs. The Clean Energy Investment Credit helps offset the upfront investment, which often makes projects viable sooner than expected.

This credit tends to matter most for businesses that own or control their facilities and expect to operate there for the long term—think manufacturers, warehouses, food processors, hospitality operators, agricultural businesses, and owner-occupied commercial real estate. If energy is a significant line item in your P&L, this credit is worth attention.

The credit includes a base rate, with the potential for higher rates if projects meet prevailing wage and apprenticeship requirements. Even at the base level, the credit can significantly reduce net project costs.

For solar and wind facilities, the credit expires for property placed in service after December 31, 2027. This is one of the most commonly misunderstood details. The clock stops when the system is placed in service, not when contracts are signed, equipment is ordered, or construction begins. Projects that slip past the deadline risk losing the credit altogether.

If you operate a facility with meaningful energy usage—and especially if you’re planning a renovation, expansion, or new build—this credit should be part of the financial conversation early. Clean energy projects reward businesses that plan ahead; waiting until the return is being prepared often means discovering the credit too late to use it.

The Common Thread: Why Credits Get Missed

Most tax credits don’t fail because a business wasn’t eligible. They fail because:

  • No one tracked the right data
  • Required elections weren’t made on time
  • HR, payroll, and finance weren’t aligned
  • Documentation didn’t support the claim

The businesses that benefit consistently treat credits as part of operations, not a year-end surprise.

How Burkland Helps

Burkland works with small and mid-sized businesses on proactive tax planning. Our tax team helps clients:

  • Identify high-impact credits early
  • Build documentation that holds up under scrutiny
  • Coordinate tax strategy across finance, payroll, and HR
  • File accurately and defensibly

If you want to know which credits apply to your business and how to claim them, Burkland can help you get there before the window closes. Contact us to request a free consultation.