What are the 2024 small business tax credits I should know about?

by | Jun 27, 2025 | Business Taxes, Credits & Incentives

Here’s what HIVE AI had to say about “What are the 2024 small business tax credits I should know about?”:

Based on the provided documents and current tax law, here are the key small business tax credits you should be aware of for 2024:

Research and Development Credits

The Research and Development Credit (IRC Section 41) has been made permanent and offers significant benefits for qualifying small businesses. Under the Inflation Reduction Act of 2022, qualified small businesses can now elect to apply up to $500,000 of their research tax credit against both the employer’s share of Social Security and Medicare taxes, increased from the previous limit of $250,000 IRS IRM 4.23.5 Technical Guidelines for Employment Tax Issues IRS IRM 4.23.5 Technical Guidelines for Employment Tax Issues . This enhancement is particularly valuable for startups and small businesses with limited income tax liability, as it allows them to monetize their R&D investments through payroll tax reductions.

Small Employer Pension Plan Startup Cost Credit

The Small Employer Pension Plan Startup Cost Credit (Form 8881) is available to eligible employers who establish or administer an eligible employer plan. To qualify, employers must have had no more than 100 employees who received at least $5,000 of compensation during the tax year preceding the first credit year IRS IRM 21.7.4 Income Taxes/Information Returns IRS IRM 21.7.4 Income Taxes/Information Returns . For tax years beginning before January 1, 2020, the credit equals 50 percent of the start-up costs paid or incurred during the tax year, limited to the first three years of the plan’s start-up costs, with a maximum credit of $500 for the first credit year and each of the two following taxable years IRS IRM 21.7.4 Income Taxes/Information Returns .

Small Employer Health Insurance Premium Credit

The Small Employer Health Insurance Premium Credit (Form 8941) provides maximum benefits to smaller employers with 10 or fewer full-time equivalent employees paying annual average wages of $25,000 or less. The credit may be reduced depending on the number of employees and wage amounts, and is completely phased out for employers with 25 or more full-time equivalent employees or those paying average wages of $50,000 per year or more IRS IRM 5.18.1 Automated Substitute for Return (ASFR) Program . This credit is non-refundable for small business employers, but unused amounts can be carried back for one year or forward for 20 years to other tax years IRS IRM 5.18.1 Automated Substitute for Return (ASFR) Program .

Work Opportunity Tax Credit

The Work Opportunity Credit (Form 5884) is part of the general business credit system IRS IRM 21.7.4 Income Taxes/Information Returns and provides incentives for hiring individuals from certain targeted groups who have consistently faced significant barriers to employment. This credit can be particularly valuable for small businesses looking to expand their workforce while receiving tax benefits.

Energy and Environmental Credits

Several energy-related credits are available to small businesses in 2024. The Alternative Fuel Vehicle Refueling Property Credit (Form 8911) applies to the cost of qualified fuel vehicle refueling property, while the Biodiesel, Renewable Diesel, or Sustainable Aviation Fuels Credits (Form 8864) provide benefits for businesses involved in alternative fuel production IRS – Publication 334: Tax Guide for Small Business (For Individuals Who Use Schedule C) IRS – Publication 334: Tax Guide for Small Business (For Individuals Who Use Schedule C) . The Carbon Oxide Sequestration Credit (Form 8933) is available for carbon oxide that is captured at a qualified facility and disposed of in secure geological storage or used in qualified enhanced oil or natural gas recovery projects IRS – Publication 334: Tax Guide for Small Business (For Individuals Who Use Schedule C) .

Employer Credit for Paid Family and Medical Leave

IRC Section 45S established a non-refundable tax credit for eligible employers that provide paid family and medical leave. The credit equals a percentage of wages (ranging from 12.5% to 25%) paid to qualifying employees while on family and medical leave IRS IRM 21.6.3 Credits . This credit encourages small businesses to provide family-friendly benefits while receiving tax relief.

Clean Energy Manufacturing Credits

The Qualifying Advanced Energy Project Credit program has allocated approximately $4 billion in credits in the first allocation round, with an additional $6 billion in credits available for the second round of allocations IRS Newsroom – IR-2024-124 IRS Newsroom – IR-2024-124 . This program supports clean energy manufacturing and recycling projects, greenhouse gas emission reduction projects, and critical material projects.

Important Considerations

Some credits have expiration dates, so it’s essential to check the instructions for each credit to ensure it is available for 2024 IRS – Publication 334: Tax Guide for Small Business (For Individuals Who Use Schedule C) . For many credits, the definition of “eligible small business” typically includes corporations whose stock is not publicly traded, partnerships, or sole proprietorships with average annual gross receipts not exceeding $50,000,000 for the three-taxable-year period preceding the current taxable year IRC § 38(c) .

These credits are generally claimed as part of the General Business Credit on Form 3800, and many have specific eligibility requirements, documentation needs, and calculation methods. It’s crucial to maintain proper records and consult with a tax professional to ensure compliance with all requirements and to maximize the benefits available to your small business.

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