When it comes to federal income tax law, there’s an advantage to being a small business. Certain tax breaks only apply to businesses that meet the definition of “small.” There are various definitions for this purpose. Some use gross receipts (what the business takes in), some use the number of employees, and some use business assets. There are more than 3 dozen tax breaks exclusively for small businesses. Here is a half dozen great write-offs or other opportunities that larger businesses can’t use.
1. Full interest expense deduction
If you make interest payments on loans, credit cards, and lines of credit, you can deduct all of the payments because you are a small business. Larger businesses are subject to an interest expense deduction limitation, which means their interest deduction can’t exceed the sum of business interest income, 30% of adjusted taxable income, and floor plan financing (for car dealers). Large real estate and farming businesses can elect to avoid the limitation by making changes in their depreciation method. Find details about this limitation in the instructions to Form 8990.
Definition of “small” for this break:
For 2025, “small” means having average annual gross receipts in the 3 prior years not exceeding $31 million (“the gross receipts test”). For 2026, the gross receipts test is $32 million.
2. Refund of certain R&D expenses
The One Big Beautiful Bill Act (OBBBA) restores expensing of eligible research and experimentation cost which, for 2022 through 2024 had to be deducted ratably over no less than 5 years. OBBBA allows small businesses that had eligible expenses that were amortized in 2022, 2023, or 2024, to file amended returns on which the costs can be expensed. This will generate tax refunds. Alternatively, like businesses of any size, they can opt to deduct the unamortized amounts in full on their 2025 returns or half for 2025 and half for 2026.
Definition of “small” for this break:
The same gross receipts test described above applies for this refund opportunity restricted to small businesses.
3. Expensing of building improvements
Usually, the cost of building improvements is recovered through depreciation over a set number of years. But if you’re a small business that owns a building, you may be able to fully the deduct the cost of improvements upfront. Guidance on this expensing option is explained FAQs (see “safe harbor for small taxpayers”).
Definition of “small” for this break:
You must have average annual gross receipts in the 3 prior years not exceeding $10 million and the unadjusted basis of the building (usually what you paid for it) is no greater than $1 million and the total paid for improvements does not exceed the lesser of 2% of the unadjusted basis of the building or $10,000.
4. Tax credits for retirement plans
There are several tax credits related to qualified retirement plans that are restricted to small businesses:
- Startup credit
- Auto-enrollment credit
- Military spouse enrollment credit
- Military spouse contribution credit
- Employer contribution credit
The amount of these credits and other rules can be found in the instructions to Form 8881.
Definition of “small” for these credits:
Being “small” means having more than 100 employees with compensation over $5,000 in the preceding year.
5. Tax credit for accessibility
The Americans with Disabilities Act requires all businesses to make reasonable accommodates for job applicants and employees with a disability, as well as to make facilities accessible to the public. Small businesses can take a tax credit to provide or enhance accessibility that can be a great as $5,000. Details about this tax credit can be found in the instructions to Form 8826.
Definition of “small” for this credit:
Being treated as a “small” business for this purpose means having gross receipts of no more than $1 million in the preceding year or no more than 30 full-time employees in the preceding year.
Health coverage
Only applicable large employers (ALEs) are required to provide minimum affordable health coverage to their full-time employees (“employer mandate”). But small businesses that want to see that their employees have health coverage can obtain tax breaks, including:
- Tax credit of 50% of premiums for coverage obtained through the government’s SHOP. Find details in the instructions to Form 8941.
- Deduction for reimbursements under a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). Guidance on QSEHRAs can be found in an IRS notice, but reimbursement limits change annually.
Definitions:
For the small employer health coverage credit, “small” means having no more than 25 full-time and full-time equivalent employees. For a QSEHRA, “small” means having fewer than 50 full-time and full-time equivalent employees (i.e. not being subject to the employer mandate explained above).
6. Research chttps://www.irs.gov/pub/irs-pdf/i6765.pdfredit as offset to employment taxes
Usually, the research credit is an offset to income taxes. But small businesses can opt to use the credit to offset FICA as follows: up to $250,000 of the employer’s share of Social Security taxes and another $250,000 of the employer’s share of Medicare taxes. This is called the payroll tax credit election. Find details in the instructions to Form 8974.
Definition of “small” for the FICA offset:
Being “small” means having gross receipts of no more than $5 million for the current year and no gross receipts during the 5-year period ending with the current year.
Final thought
There are nearly 4 dozen tax breaks exclusively for small businesses and their owners, which are explained in great detail in J.K. Lasser’s Small Business Taxes 2026. Be sure to discuss with your CPA or other tax pro which breaks may be relevant to your situation so you can claim every tax write-off you’re entitled to.
Find more blogs about small business tax rules in this list here.
