2025 Tax Credits Your Business Shouldn’t Overlook

As we start to near the end of 2025, tax planning is top of mind for many business owners who want to maximize savings. One of the most effective ways to do this is by leveraging business tax credits 2025 programs designed to reward innovation, sustainability, and job creation. Unlike deductions, which reduce taxable income, tax credits lower your tax liability dollar-for-dollar. That means qualifying businesses can significantly cut costs while making strategic investments that also strengthen long-term growth.

Here, we take a comprehensive look at federal and state tax credits available in 2025, how to qualify, and why you should make them part of your financial strategy.

Federal Tax Credits to Watch in 2025

1. Energy-Efficient Commercial Buildings (Section 179D)

The Section 179D deduction and related credits have been extended and expanded under recent legislation. If your business installs energy-efficient lighting, HVAC systems, or building envelope improvements, you may qualify.

Building owners and certain tenants making improvements; architects and designers working on public buildings can sometimes claim allocation. There are both credits and deductions available in this category, but the important thing to know is that you have to meet specific energy efficiency standards that are established by the Department of Energy. 

You will benefit from the tax credit options, but you will likely also experience some efficiency cost savings as well. 

2. Investment Tax Credit (ITC) for Renewable Energy

If your company invests in solar panels, wind turbines, or other qualifying renewable energy systems, you may claim the ITC. This is less common, but still one to know about. Businesses installing renewable energy systems for their own operations or for leased property are those who will qualify. In this scenario, a percentage of installation costs can be claimed as a credit, with additional “bonus credits” for projects located in low-income or energy communities.

3. Research & Development Tax Credit

The R&D credit remains one of the most underutilized federal incentives. It rewards companies for developing new products, processes, or software as well as for improving existing ones. Any business in manufacturing, engineering, software, biotech, food production, and similar industries can qualify. 

Qualified expenses include employee wages, supplies, and contract research that is specific to innovation for approved research. This tax credit encourages research and innovation by cutting a break on something that could easily just be experimentation. 

4. Work Opportunity Tax Credit

This tax credit really focuses on hiring individuals who might otherwise face barriers to employment. It applies to employers hiring veterans, long-term unemployed individuals, and recipients of government assistance. The credit amount will vary depending on wages paid and hours worked. 

5. Disabled Access Credit

Small businesses making facilities, equipment, or digital platforms accessible to individuals with disabilities may claim this credit. In general, it only applies to companies under $1 million in revenue with fewer than 30 full-time employees. The credit covers a portion of expenses such as wheelchair ramps, accessible restrooms, and screen-reader software. 

State-Level Tax Credits in 2025

Photo by Microsoft 365 on Unsplash

In addition to valuable federal incentives, Kentucky offers a variety of tailored tax credits designed to support businesses growing, training staff, investing in infrastructure, or expanding their operations within the state.

Kentucky Business Investment Program

This program targets businesses that locate or expand in Kentucky by offering income tax credits and wage assessments. Eligible companies include manufacturers, agribusinesses, regional and national headquarters, non-retail services, and technology-related firms. To qualify, businesses typically must create new jobs and make significant capital investments. In many cases, these credits may cover up to 100% of the corporate income tax liability and up to 4.5% of taxable wages over a period of up to 15 years, depending on location and specifics of the project.

Kentucky Enterprise Initiative Act

This program is designed for expansion or new projects in manufacturing, service, technology, or agribusiness. KEIA provides refunds of state sales and use tax paid on eligible construction materials and equipment, specifically those used for R&D or electronic processing systems. Projects must involve a minimum investment of $500,000 to qualify. Credits are negotiated through the Kentucky Economic Development Finance Authority and are available over a period of up to seven years, subject to annual and project limits.

Kentucky Small Business Tax Credit

This credit rewards small businesses that make key investments and add jobs. To be eligible, a company must have 50 or fewer full-time employees, hire at least one new full-time employee, and invest at least $5,000 in qualifying equipment or technology. Depending on the level of job creation and investment, businesses can receive $3,500 to $25,000 per year in state income tax credit, which may be carried forward for several years.

Skills Training Investment Credit & Grant-in-Aid

Kentucky also supports workforce development with two complementary programs:

• Skills Training Investment Credit (STIC): Offers a tax credit equal to $500 per full-time employee trained, up to $75,000, helping businesses offset the cost of upskilling their staff.
• Grant-in-Aid Program: Matches training costs up to 50% of the eligible training expense, with caps per employee, reducing the financial burden of customized training

The Strategic Value of Tax Credits

Tax credits do more than just trim bills. They can shape business strategy by:

• Encouraging investments that modernize operations
• Funding workforce expansion without draining cash flow
• Supporting sustainability initiatives that attract eco-conscious consumers
• Building resilience by offsetting the costs of compliance and innovation

Smart business owners see tax credits not as a once-a-year perk but as an ongoing part of financial planning. When leveraged properly, they can accelerate growth, enhance brand reputation, and free up resources for reinvestment.

Need Help with Business Tax Credits 2025? Katherine M Johnson, CPA, Has You Covered

For business owners, 2025 presents a landscape rich with opportunities to cut tax bills through federal and state credits. From energy-efficient improvements and renewable energy investments to R&D, hiring incentives, and accessibility upgrades, the range of options is broad. The key is planning ahead, documenting thoroughly, and taking advantage of both federal and state programs.

Don’t leave money on the table. Contact Katherine M Johnson, CPA, today to explore which credits your business qualifies for and to build a tax strategy that maximizes savings in 2025 and beyond.