Small Business Tax Credits: Disabled Access, R&D, Work Opportunity, and More

Small business tax credits worth investigating:

1. Disabled Access Credit (IRC 44)

• For small businesses with $1 million or less in revenue OR 30 or fewer full-time employees
• Covers 50% of eligible access expenditures between $250 and $10,250
• Maximum credit: $5,000 per year
• Eligible expenses: ramp installation, door widening, accessible restrooms, sign language interpreters, Braille materials, website accessibility
• This credit is available EVERY YEAR (not a one-time credit)
• Many businesses qualify but never claim it
• File Form 8826

2. Research and Development Credit (IRC 41)

• Not just for tech companies; applies to any business developing new or improved products, processes, or software
• Activities that qualify: designing new products, improving manufacturing processes, developing proprietary software, testing prototypes, creating formulas
• Eligible expenses: wages for R&D employees (65% of contractor payments), supplies used in R&D
• Two calculation methods: regular (20% of qualified expenses over base amount) and simplified (14% of expenses over 50% of average prior 3 years)
• Startup provision: businesses under $5 million in revenue with less than 5 years of revenue can apply up to $500,000 of the credit against payroll tax (OBBBA increased this from $250,000)
• This is powerful for pre-profit startups: the credit offsets payroll tax even with no income tax liability
• File Form 6765

3. Work Opportunity Tax Credit (WOTC)

• Credit for hiring individuals from targeted groups
• Must certify BEFORE or on the date of hire (Form 8850 filed within 28 days)
• Credit amounts per qualifying hire:
  • Veterans: $2,400-$9,600 (depending on disability and unemployment status)
  • Long-term unemployment recipients (27+ weeks): $2,400
  • SNAP (food stamp) recipients: $2,400
  • Ex-felons: $2,400
  • Summer youth employees: $1,200
  • SSI recipients: $2,400
  • Long-term family assistance recipients: $9,000 (over 2 years)
• The employee must work at least 120 hours (reduced credit at 120-399, full credit at 400+)
• Apply through your State Workforce Agency
• File Form 5884

4. Small Employer Health Insurance Credit (IRC 45R)

• For businesses with fewer than 25 full-time equivalent employees
• Average annual wages below approximately $58,000
• Employer pays at least 50% of employee-only health insurance premiums
• Must purchase through the SHOP Marketplace
• Credit: up to 50% of premiums paid (35% for tax-exempt employers)
• Available for only 2 consecutive tax years
• File Form 8941

5. Employer-Provided Childcare Credit (IRC 45F)

• 25% of qualified childcare facility expenses + 10% of qualified childcare resource and referral expenses
• Maximum credit: $150,000 per year
• Qualified expenses: building, acquiring, or operating a childcare facility for employees
• Can include contracting with a licensed childcare provider
• Reduces basis of the facility by the credit amount
• File Form 8882

6. Energy-related credits (various)

• Energy Efficient Commercial Building Deduction (IRC 179D): up to $5.65/sq ft for energy-efficient improvements
• Electric Vehicle Credit: for qualifying business vehicles
• Clean Vehicle Credit: up to $7,500 for qualifying electric vehicles used in business
• Solar Investment Tax Credit: 30% of cost of solar installation (through 2032)

Credit vs. deduction comparison:

Item	As Deduction (24% bracket)	As Credit	Difference
$5,000 expense	Saves $1,200	Saves $5,000	$3,800 more
$10,000 expense	Saves $2,400	Saves $10,000	$7,600 more

Credits are 3-4x more valuable than deductions at typical small business tax rates.