Published January 10th, 2026

Many small business owners in Texas face the challenge of navigating a complex tax landscape where valuable credits often go unnoticed. These tax credits can significantly reduce your tax burden, freeing up resources to reinvest in your business, hire new employees, or enhance your operations. Unfortunately, the complexity of federal and state tax rules means that without clear guidance, many entrepreneurs miss out on these opportunities. Understanding and claiming these credits is not only achievable but essential for proactive tax planning. By exploring commonly overlooked credits, you empower yourself with knowledge that can translate into real savings. While this overview highlights some of the top tax credits available, professional expertise can tailor these benefits to your unique business situation, ensuring you capture every dollar you're entitled to. Unlocking these credits is a strategic step toward stronger financial health and sustainable growth for your Texas small business.

The Home Office Deduction: Maximizing Savings from Your Workspace

The home office deduction lets you treat part of your home like a business facility, instead of just a personal space. When that space qualifies, a portion of what you already pay to live there shifts into a tax-deductible business expense.

Who Qualifies For The Home Office Deduction

The IRS focuses on two main tests: regular and exclusive use, and principal place of business.

• Regular and Exclusive Use: A defined area of the home is used on a consistent basis, and only for business. A true office, not the kitchen table you also use for family meals.
• Principal Place Of Business: You conduct most management and administrative work there. Even if you see clients at other locations, the planning, recordkeeping, and day-to-day control of the business happen in that home space.

Remote workers, freelancers, and small business owners who operate from home often meet these tests without realizing it.

Expenses That May Qualify

Once the space qualifies, you can usually split certain costs between personal and business use based on the percentage of your home used for business.

• Direct expenses: Costs only for the office area, such as painting that room or fixing damage in that space. These are typically fully deductible.
• Indirect expenses: Shared costs, allocated by square footage or a reasonable method, such as:
• Mortgage interest or rent
• Homeowners or renters insurance
• Utilities (electricity, gas, water, internet)
• Repairs and maintenance that affect the whole home
• Property taxes

How The Deduction Is Calculated

There are two main methods:

• Regular Method: Measure the office's square footage, divide by the home's total square footage, and apply that percentage to qualifying indirect expenses. Add any direct expenses on top.
• Simplified Method: Use a flat IRS rate per square foot of office space, up to the allowed cap. No detailed expense breakdown, but usually a smaller deduction.

Professional tax preparation helps weigh which method produces a stronger benefit while staying compliant.

Common Misconceptions And IRS Concerns

• "The IRS will target me if I claim this." A properly documented, reasonable home office deduction is a normal part of many small business returns.
• "I need a separate building." A spare bedroom, finished garage, or dedicated corner of a room can qualify if it meets the exclusive and regular use standard.
• "I work from home sometimes, so the whole house counts." Only the specific, dedicated business area is eligible.

For Texas business owners who run operations from home, this deduction often ties directly into other business expense credits and write-offs. Rent, utilities, and similar everyday costs may carry tax advantages when they are tracked correctly and tied to business use. Careful records and knowledgeable preparation turn those routine bills into organized, defensible savings instead of missed opportunities. 

Work Opportunity Tax Credit (WOTC): Incentives for Hiring Targeted Groups

The Work Opportunity Tax Credit rewards employers that give job opportunities to people who often struggle to get hired. Instead of just treating payroll as a cost, WOTC turns certain hires into a direct reduction of federal income tax.

The credit applies when you hire workers from specific groups, such as:

• Qualified veterans
• People with prior felony convictions
• Long-term unemployed individuals
• Certain public assistance recipients, including some SNAP and TANF recipients
• Designated community residents and vocational rehabilitation referrals

Core Eligibility Rules

The employee must be from a qualifying target group, and the employer must obtain proper certification. The hire must be new, not someone already on your payroll. The worker must perform at least 120 hours of service for you before you claim any credit, with a larger credit available when they reach 400 hours.

The credit is based on a percentage of first-year wages, up to a wage cap that depends on the category of the worker. That structure means each eligible hire can reduce your tax bill by hundreds or even thousands of dollars when used correctly.

How The Application Process Works

To protect the credit, the paperwork has to line up with the hiring date. Within 28 days of the employee's start date, you submit IRS Form 8850, along with the required state workforce agency forms, to request certification that the worker meets a target group definition. Once certified, the credit is calculated and claimed on your federal income tax return using Form 5884 and, if needed, the general business credit form.

Because WOTC is a federal program, it often pairs well with other employer-focused incentives available to Texas businesses, including state-level workforce and training programs. Together, these tools let you shape a hiring strategy that supports community employment while easing your overall tax load.

Thoughtful planning matters here. When hiring decisions, onboarding paperwork, and payroll records are coordinated with your broader tax strategy, WOTC becomes more than a one-time bonus. It becomes part of a repeatable process. Expert tax advisors at Infinity Tax and Financial Service review your hiring patterns, help flag potentially eligible workers early, and guide the certification and reporting steps so the credit shows up where it belongs - lowering your tax liability and supporting long-term staffing goals. 

Small Business Health Care Tax Credit: Making Employee Benefits Affordable

The Small Business Health Care Tax Credit rewards employers that shoulder the cost of health coverage for a smaller team, not just large corporations. When coverage is offered through the Small Business Health Options Program (SHOP), this credit can reimburse a meaningful share of what you pay toward employee premiums.

To qualify, the business must meet several thresholds:

• Fewer Than 25 Full-Time Equivalent Employees: Part-time hours are combined to determine the full-time equivalent count.
• Modest Average Wages: The average annual wage per full-time equivalent employee must fall below a set IRS limit for the year.
• Employer-Paid Premiums: You pay at least 50% of the cost of employee-only coverage through a SHOP plan.
• Proper SHOP Enrollment: The plan is purchased and maintained through the SHOP marketplace, not directly from an insurer.

When those conditions are met, eligible for-profit employers may receive a credit of up to 50% of the premiums they pay, while qualifying tax-exempt employers may receive up to 35%. The actual percentage depends on your exact headcount and average wages, so the strongest savings usually go to businesses with fewer employees and lower average pay.

This credit does more than trim your tax bill. It helps keep health benefits sustainable, which supports retention, reduces turnover costs, and keeps your team healthier and more stable. Combined with other employer-focused incentives, health coverage becomes part of a larger strategy: using well-structured benefits to control total labor costs while still investing in your staff.

A skilled tax professional reviews your payroll, SHOP enrollment, and premium contributions, then fits the health care credit into your broader tax plan. That coordination turns what feels like a pure expense into a tool that supports both employee well-being and long-term business finances. 

Texas-Specific Tax Incentives: Personal Property and Beyond

Federal credits shape the foundation of a strong tax plan, but Texas layers on its own set of savings. When state incentives are coordinated with federal benefits, the combined effect often shows up in lower business equipment costs, lighter property tax bills, and more room in your budget for reinvestment.

Small Business Personal Property Tax Exemption

Recent legislative changes raised the value threshold for the Texas small business personal property tax exemption. That shift means more equipment, furniture, and certain business assets may fall below the taxable level, or at least reduce what is subject to local property tax.

On the ground, that affects items like:

• Computers, tablets, and point-of-sale systems
• Office furniture, chairs, and storage
• Tools, machinery, and shop equipment
• Some fixtures used in salons, trades, or mobile services

When these assets are tracked carefully, you receive two layers of value. Depreciation or expensing on the federal return lowers income tax, while the state's higher exemption threshold trims the local property tax tied to your business personal property rendition.

Texas Workforce And Development Incentives

Texas workforce tax credits and training incentives add another piece to the puzzle. Some programs reward hiring and developing employees in targeted industries or areas, often through reduced state tax or reimbursement for training costs.

These tools pair well with federal hiring credits like the Work Opportunity Tax Credit. One hire, structured properly, may support federal income tax savings, state-level workforce support, and a stronger, more skilled team. The key is aligning your hiring, payroll records, and reporting deadlines with both federal and state requirements.

Local knowledge becomes important here. An advisor who spends every season working with Texas rules, like the team at Infinity Tax and Financial Service in Addison, reads those state-level changes alongside your federal position so your equipment purchases, hiring, and expansion plans all point toward the same goal: durable, lawful tax savings instead of scattered, one-off wins. 

Commonly Overlooked Credits: Meals, Energy, and Beyond

Once the major credits are on the table, the next layer of savings often hides in smaller, routine decisions: meals with clients, energy improvements, and how you support employees with families. Each area seems minor in isolation, but together they shift real dollars off your tax bill.

Meal Expense Deductions

Business meals remain partially deductible when they have a clear business purpose and proper documentation. That includes meeting a client over lunch to review a contract, taking a potential vendor to dinner to negotiate terms, or grabbing a meal while traveling overnight for work.

Key rules include:

• Ordinary And Necessary: The meal relates directly to your trade, not personal entertainment.
• Business Discussion: You discuss business during the meal or immediately before or after.
• Recordkeeping: Keep the date, amount, location, who attended, and the business purpose.

When those details are captured in your bookkeeping instead of lost on a personal card, the deduction flows cleanly onto your return and trims taxable income.

Energy Efficiency Credits

Energy-related incentives often apply when you improve buildings or equipment in a way that reduces power use. That may include installing higher-efficiency HVAC systems, upgrading certain lighting, or investing in qualifying renewable energy components for business property.

Eligibility usually turns on technical standards and placed-in-service dates. The tax benefit may come through a direct credit, accelerated depreciation, or both. A planned equipment upgrade, timed and documented correctly, can lower out-of-pocket costs over several years instead of feeling like a pure cash drain.

Employer-Provided Childcare Benefits

Some employers support workers with dependent care by offering on-site childcare facilities or paying part of qualifying third-party care. Under federal rules, a portion of those costs may generate an employer-provided childcare credit, separate from the personal dependent care benefits employees receive.

To qualify, the program must be structured for employees in general, not just owners, and the payments must go to approved childcare providers or facilities that meet regulatory standards. For a business that relies on steady staffing, this credit helps offset the cost of a benefit that keeps employees present and focused during work hours.

Why Records And Guidance Matter

These opportunities share a few themes: the activity often occurs anyway, the rules carry fine print, and the value appears only when the records are tight. Receipts for meals, invoices for energy upgrades, and agreements for childcare support all need to be organized in a way that ties back to your general ledger.

A disciplined system for tracking expenses, backed by a professional review of the tax rules, turns scattered line items into coordinated credits and deductions. That approach reduces the risk of errors, supports compliance during an IRS review, and keeps more of your business income where it belongs - funding growth, not overpaying tax.

Understanding and leveraging the top tax credits available to small business owners in Texas can significantly reduce your tax burden and improve cash flow. From the home office deduction and Work Opportunity Tax Credit to health care incentives and state-specific exemptions, each credit offers a tangible way to keep more of your hard-earned money working for your business. Yet navigating the complex eligibility rules and documentation requirements can be overwhelming without expert guidance. That's where a trusted local partner with deep expertise in maximizing small business tax credits and minimizing preparation fees makes all the difference. With a relationship-based approach, Infinity Tax and Financial Service in Addison stands ready to help you uncover every possible tax saving tailored to your unique business situation. Taking this important step can build long-term financial confidence and position your business for sustainable growth. Reach out today to learn more about how professional support transforms tax credits into real business advantages.