The U.S. tax code contains hundreds of tax credits, but most are narrow and industry-specific. These five are broad-based credits that apply to a large share of small businesses—and are consistently underutilized.
R&D Tax Credit (Section 41)
The R&D credit rewards companies that develop or improve products, processes, software, and formulas. It covers software companies, manufacturers, food and beverage producers, engineers, architects, and many others. The credit is dollar-for-dollar against tax liability and can offset payroll taxes for qualifying startups.
Retirement Plan Startup Credit (SECURE Act)
Starting a new 401(k), SEP-IRA, or SIMPLE IRA generates a credit of up to $5,000 per year for three years—plus a new auto-enrollment credit under SECURE 2.0. Many businesses leave this entirely unclaimed.
Small Business Health Care Credit
Businesses with fewer than 25 employees paying average wages under $56,000 and covering at least 50% of employee health premiums can claim up to 50% of premiums paid as a credit. Available for two tax years.
Key Takeaways
- Most small businesses claim zero or one of the tax credits available to them.
- The R&D credit, retirement startup credit, health care credit, disabled access credit, and WOTC are the five most broadly applicable underutilized credits.
- A single conversation with an R&D specialist or your CPA can identify thousands of dollars in unclaimed credits.
