7 Essential Small Business Tax Deductions & Credits to Maximize Savings in 2026

As a small business owner, you are entitled to take every tax deduction and credit that you are eligible for. However, not many small business owners are aware of this, so they miss out on the most effective small business tax deductions and credits they qualify for each year. This guide helps you learn how to maximize deductions and credits in 2026 through more innovative small business tax planning. Thus, you will have a firm grip on what counts as a deduction or credit and how these benefits can directly impact your bottom line. 

So, let’s understand what the seven most essential small business tax deductions and credits are. But first, let us know what the basic difference is between a tax deduction and a tax credit. 

Tax Deductions or Tax Credits: What’s the Difference? 

In everyday parlance, tax deductions and tax credits are often referred to interchangeably. However, there are crucial differences between them. While a tax deduction is used to reduce your taxable income, a tax credit usually increases your tax refund or lowers your final tax bill directly. Understanding this distinction is a key part of effective small business tax planning. 

So, let’s look at some examples of tax deductions that are valid for 2026. 

Tax Deductions for 2026: Some Examples 

1. Qualified Business Income (QBI) Deduction: If you are an eligible owner of pass-through entities (sole proprietorships, S corporations, and partnerships), then you can deduct 20% of your qualified business income. The OBBBA has made this a permanent part of the tax code starting in 2026. Thus, it has expanded the income thresholds for eligibility, making this one of the most valuable small business tax deductions available. 
2. Health Insurance Premiums: If you are a self-employed individual, then you can deduct 100% of your health insurance premiums for yourself, your spouse, and your dependents. 
3. Retirement Plan Contributions: Further, contributions to retirement plans such as a SEP IRA, SIMPLE IRA, or Solo 401(k) are tax-deductible business expenses. This offers a powerful way to build long-term wealth while reducing current taxes through proactive small–business tax planning. 
4. Section 179 and Bonus Depreciation: Businesses can deduct the full cost of eligible equipment, machinery, and software in the year they begin using it, rather than spreading the deduction over several years. This applies to both new and used assets. Under the OBBBA, the government permanently reinstated 100% bonus depreciation and maintained substantial Section 179 limits for 2026. This has made it easier for businesses to reduce taxable income when they invest in growth. 
5. Home Office Deduction: You may have to use a portion of your home exclusively and regularly as your principal place of business. If this is the case, you can deduct a percentage of your mortgage or rent, utilities, and insurance costs. The simplified method allows a deduction of $5 per square foot, up to 300 square feet. 
6. Vehicle Expenses: You can deduct costs for business use of a vehicle. This can be done by using either the standard mileage rate (the 2025 rate was 70 cents per mile) or the actual expense method (gas, repairs, insurance, etc.). However, detailed mileage logs are essential for documentation. 
7. Salaries and Benefits: If you are an employer, then wages, salaries, and benefits paid to employees (but not the owner in a sole proprietorship) are fully deductible business expenses. This also includes costs for health plans and contributions to employee retirement funds, further strengthening your overall small-business tax-deduction strategy. 

Tax Credits for 2026: Some Examples 

1. Small Business Health Care Tax Credit: This credit is available to small employers. To qualify as a small employer, you need to have fewer than 25 full-time equivalent employees. Further, they need to pay at least 50% of their employees’ health insurance premiums through a Small Business Health Options Program (SHOP) Marketplace plan. 
2. Work Opportunity Tax Credit (WOTC): This credit encourages businesses to hire individuals from certain target groups that face significant barriers to employment, such as certain veterans or the long-term unemployed. 
3. Employer-Provided Childcare Credit: Starting in 2026, the OBBBA significantly expands this credit for businesses that provide or subsidize childcare services for their employees. 
4. Earned Income Tax Credit (EITC): This is one of the better-known tax credits that individuals with low- or moderate-income can claim. For 2025, those who qualify receive a maximum credit of $8,046. 
5. Clean Vehicle Credit: This credit is available to qualifying individuals who purchased an electric vehicle (EV) on or before September 30, 2025. However, this credit is being phased out. 
6. Childcare Tax Credit: This tax credit helps families with children under the age of 17 reduce their tax bill. In 2025, eligible families can claim up to $2,200 per child, directly lowering the amount of tax they owe. 
7. Employer Credit for Paid Family & Medical Leave: This tax credit is available to employers who offer paid family and medical leave to their employees. It allows businesses to claim a credit equal to a percentage of wages paid to eligible employees while they are on approved leave, helping reduce the overall cost of providing these benefits. 

Why Not Consult a Tax Professional? 

Since federal, state, and local tax laws change and evolve every year, it becomes difficult for business owners to keep up with the changes. Hence, it is a wise and legitimate decision to work with a tax professional to understand which small business tax deductions and credits you are eligible for while maintaining compliance. 

Why Stratax Advisors? 

Identifying tax deductions and credits is only the first step. The real value lies in applying them correctly, at the right time, and in a way that aligns with your broader business goals. That’s where Stratax Advisors makes a difference. 

Stratax Advisors specializes in small business tax planning, helping business owners move beyond basic compliance to proactive, year-round tax strategies. Our team stays ahead of evolving tax laws, including new provisions under the OBBBA, to ensure you don’t miss opportunities that could significantly reduce your tax burden. 

Whether it’s structuring deductions efficiently, maximizing available tax credits, or ensuring accurate documentation to withstand scrutiny, Stratax Advisors provides practical, tailored guidance—so your tax strategy supports growth, cash flow, and long-term stability. 

Conclusion 

Small business tax deductions and credits are among the most powerful tools available to small business owners—but only if they are understood and used correctly. From equipment write-offs and retirement contributions to employee-related credits and family-focused benefits, the opportunities in 2026 are substantial. 

By taking a strategic approach to small business tax deductions, leveraging eligible credits, and planning rather than reacting at tax time, businesses can significantly improve after-tax profitability. The key is knowing what applies to your company and how to claim it correctly. 

What Next? 

Don’t leave money on the table in 2026. If you want to maximize savings, stay compliant, and build a more effective small business tax planning strategy, now is the time to act. Stratax Advisors can help you uncover overlooked deductions, apply the proper credits, and plan proactively, and that too, before deadlines limit your options. Schedule a consultation with Stratax Advisors today and turn tax complexity into a strategic advantage for your business. 

Tax rules and eligibility requirements may vary based on individual circumstances. Always consult a qualified tax advisor before making tax-related decisions.