Small Business Tax Credits: What's Changing Next?

Tax law rarely moves quickly, but 2026 has been an exception for small business owners. A sweeping 2025 tax package rewrote the rules on childcare credits, equipment write-offs, and research expensing, all while a separate bill sits in Congress that could push the math even further in owners’ favor. For a business owner trying to plan next year’s budget, the practical question isn’t whether small business tax credits are changing. It’s which ones apply to your business, and how much they’re actually worth.

Here’s a clear-eyed look at what’s already law, what’s still pending, and what deserves a spot on your 2026 planning checklist.

What Counts as a Small Business Tax Credit?

It helps to start with a distinction that trips up a lot of business owners: a tax credit and a tax deduction aren’t the same thing. A deduction reduces the income you’re taxed on. A credit reduces the tax bill itself, dollar for dollar, which generally makes credits more valuable per dollar than deductions of the same size.

Small business tax credits typically fall into a few buckets: credits for specific business activities, like offering employees childcare or investing in research, and broader deductions, like the Qualified Business Income deduction, that function similarly by shrinking a business’s overall tax burden. Both categories saw significant changes in the last year.

The Big Picture: A Major Tax Law Reshaped the Landscape

Most of what’s changing traces back to the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. The legislation made several previously temporary, Trump-era tax provisions permanent, while also introducing new benefits that phase in specifically in 2026. For small business owners, this means many of the year-to-year “will this expire” questions that complicated tax planning for the better part of a decade have been resolved, at least for now, replaced by a new set of expanded thresholds and credit amounts to understand.

It’s worth noting: several provisions in OBBBA remain politically contested, and clean-energy-related credits in particular are being narrowed even as most core small-business provisions expand. The law is not uniformly generous across every category, which is exactly why understanding the details matters more than headlines suggesting a blanket tax cut.

The Employer Childcare Credit Just Got Much More Valuable

One of the more significant, and less discussed, changes involves the credit for employers who help provide childcare for their workforce. Starting in 2026, the credit rate jumps from 25% to 40% of qualified childcare expenses for most businesses, and the maximum annual credit rises from $150,000 to $500,000.

Small businesses get an even better deal. Companies with average annual gross receipts of $32 million or less over the preceding three years can claim 50% of qualified expenses, up to a maximum credit of $600,000 a year. In practical terms, a qualifying small business that spends $1.2 million supporting employee childcare could claim the full $600,000 credit, cutting the effective cost of that benefit in half.

For small businesses competing with larger employers for talent, this credit changes the math on whether offering childcare support, either directly or through a resource-and-referral program, is worth the investment.

Bigger, Faster Write-Offs for Equipment and Technology

Two related provisions affect how quickly businesses can deduct the cost of equipment, software, and other capital investments.

Section 179 expensing allows businesses to deduct the full cost of qualifying equipment in the year they buy it, rather than depreciating it over several years. OBBBA roughly doubled the expensing cap, from $1.25 million to $2.5 million, with the deduction phasing out for businesses that place more than a few million dollars of qualifying property into service in a given year.

Small Business Finance — Small Business Tax Credits

Bonus depreciation, a related mechanism that had been scheduled to phase down toward zero under prior law, was restored to 100% and made permanent under OBBBA. Combined, these two provisions give small businesses considerably more flexibility to time large purchases, like machinery, vehicles, or technology upgrades, for maximum tax benefit in the year of purchase rather than spreading deductions out over time.

The QBI Deduction: Now Permanent, and Possibly Expanding Further

The Qualified Business Income (QBI) deduction lets owners of pass-through businesses, including sole proprietorships, partnerships, and S corporations, deduct up to 20% of their qualified business income. It was originally set to expire at the end of 2025; OBBBA made it permanent instead.

Beyond permanence, the law also widened the income thresholds at which the deduction begins phasing out, particularly for specified service trades or businesses like law firms, medical practices, and consultancies that previously lost the benefit more quickly as income rose. It also introduced a new minimum deduction of at least $400 for anyone with at least $1,000 of qualified business income, ensuring smaller, lower-income filers still see some benefit.

There’s a further wrinkle worth watching. A newly introduced bill, the Small Business Tax Cut Act of 2026, would raise the QBI deduction rate itself from 20% to 23%. As of this writing, the bill has not passed Congress, and its prospects remain uncertain, but it illustrates that even after last year’s major overhaul, small business tax credits and deductions remain an active area of legislative debate rather than a settled matter.

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A Second Chance on Research and Development Expenses

Businesses that invest in research and development also got meaningful relief. OBBBA restored full, immediate expensing of domestic R&D costs, reversing a stricter amortization requirement that had been phased in a few years earlier and had frustrated many small and mid-sized companies investing in product development.

Notably, the law allows certain eligible small businesses to retroactively apply full expensing to R&D costs incurred in 2022, 2023, and 2024, a change that requires amending prior returns but could unlock meaningful refunds for businesses that absorbed the less favorable rules during that window. Any business considering this route should work with a tax professional, since amending multiple years of returns also means revisiting any R&D credits already claimed in those years.

Retirement Plan Credits Got Sweeter Too

Separate from OBBBA, the ongoing rollout of SECURE 2.0 Act provisions continues to expand credits available to small businesses that start new retirement plans for employees. These include increased startup-plan tax credits, the ability to offer Roth-style employer contributions, and extended catch-up contribution options for older workers. For small businesses without an existing retirement plan, these credits meaningfully offset the cost of establishing one, which can also serve as a competitive hiring tool.

What’s Being Phased Out: Not Every Credit Is Growing

It’s worth being direct about the flip side. Not every small business credit is expanding. Section 179D, an energy-efficiency deduction for commercial buildings, is being terminated for new construction projects starting after mid-2026. Several clean-energy credits tied to the 2022 Inflation Reduction Act, particularly those supporting solar, wind, and non-carbon transportation investments, are being narrowed through accelerated phase-out schedules, tighter eligibility rules, and new restrictions related to foreign entities involved in supply chains.

Businesses that had been planning around these credits, particularly in construction, clean energy, or transportation, should revisit those plans carefully rather than assuming prior assumptions still hold.

What Small Business Owners Should Actually Do Now

None of this is a substitute for individualized tax advice, since eligibility rules, entity structure, and income levels all affect which credits actually apply to a given business. That said, a few general steps are worth prioritizing heading into the rest of 2026:

Review whether your business crosses the $32 million gross receipts threshold that determines eligibility for the enhanced small-business childcare credit rate.
Model major equipment purchases against the new Section 179 and bonus depreciation limits before finalizing capital budgets.
Revisit prior R&D expensing decisions if your business invested in product or process development between 2022 and 2024.
Confirm your QBI deduction phase-out thresholds, especially if your business falls into a specified service trade or business category.
Watch legislative developments, since the Small Business Tax Cut Act of 2026 and other proposals could still change the picture again before year-end.

The Bottom Line

Small business tax credits didn’t just get an update in 2025 and 2026; they got a structural overhaul that will likely shape planning for years to come. Employer childcare credits, equipment expensing, the QBI deduction, and R&D expensing all became more generous, in some cases significantly so, while select energy-related credits moved in the opposite direction. What remains consistent is the value of reviewing these changes against your specific business structure rather than assuming a general tax cut applies evenly across the board, and working with a qualified tax professional to apply them correctly.

Sources

Kahn, Litwin, Renza (KLR) — “2026 OBBBA Tax Changes for Businesses: Key Credits, QBI, and More”
Carr, Riggs & Ingram — “Small Business Deductions and Limits You Need to Know in 2025 and 2026”
Polston Tax — “Here’s the Tax Credits and Tax Deductions That Changed for 2026”
Grant Thornton — “2026 Business Tax Planning Guide”
Millan CPA — “2026 Business & Pass-Through Tax Rules: QBI, SALT & §179 Updates”
National Federation of Independent Business (NFIB) — “2026 Tax Changes for Small Businesses” presentation
ARF Financial — “Update on the Small Business Tax Deduction: What to Know in 2026”
US Filing Services — “Small Business Tax Changes in 2026: Deductions, Credits, and Updates”

Disclaimer: This article is for general informational purposes only and does not constitute personalized tax advice. Eligibility for these credits depends on individual business circumstances; consult a licensed CPA or tax advisor before making decisions based on this information.