The Tax Credit Opportunities Startups Often Forget (And Why It Keeps Happening)

By Harrison Garba

Founders spend a lot of time thinking about capital. They model burn carefully. They negotiate valuation. They weigh hiring plans against runway.

But many startups overlook a source of capital that doesn’t require dilution at all: tax credits. And to be clear, this isn’t typically because a business doesn’t qualify. It’s because no one builds a process to identify and capture these credits consistently.

Most startups are aware of at least one major opportunity, and that’s the Research & Development tax credit. But fewer founders take a broader look at business decisions throughout the year and how many of those may lead to tax credit opportunities. Hiring decisions, benefit structures, accessibility upgrades, facility investments and certain energy projects all can carry incentives.

So, the issue isn’t eligibility. It’s ownership, timing and consistency.

Harrison Garba

In early-stage companies, finance teams are lean. Credits often get discussed once a year during tax preparation. However, by that point, it can be too late. The required elections may have been missed, documentation may not support a claim, or deadlines may have passed.

When that happens, the opportunity is gone. We see this pattern frequently in examples such as:

A company hires several employees who may have qualified for a hiring credit, but no screening process was in place at onboarding.
A retirement plan is launched without evaluating available startup or employer contribution credits.
Paid leave policies are expanded without reviewing whether a federal credit applies.
A facility upgrade is completed without considering whether accessibility- or energy-related incentives were available before the project was placed in service.

None of the above decisions are inherently wrong, but they are incomplete.

Coordinating credits

Tax credits don’t appear automatically because money was spent. Taking advantage requires planning, including specific documentation, elections and coordination between departments. Without that coordination, even well-managed startups leave savings unclaimed.

More-mature companies approach this differently.

Instead of waiting until year-end to ask, “Did we qualify for anything?” established organizations build periodic reviews into their operating cadence.

Hiring processes include the necessary steps to preserve potential credits.
Engineering teams track qualifying activities as projects progress.
Finance evaluates larger operational investments before contracts are finalized.

This doesn’t mean turning every department into tax specialists. It requires clarity around who’s responsible for asking the question early enough, and it ideally includes expert guidance and support to get it right.

It’s helpful to think about this as an evolution.

At a reactive stage — which is most startups — credits are evaluated only when the tax return is being prepared. At a more structured stage, the company reviews credit opportunities quarterly and aligns documentation throughout the year. And in a strategic stage, leadership fully understands how certain business decisions may create incentives and ensures the right processes are in place before those decisions are implemented.

Multiple credits add up

The accumulated financial impact can be meaningful. While a single credit isn’t likely to transform a business, multiple credits across hiring, development and benefits can offset real costs. For companies focused on extending runway without raising additional capital, those offsets matter.

There’s also a governance component.

Investors and buyers increasingly review operational controls during diligence. A startup that has evaluated available credits and maintained documentation signals discipline. A company that hasn’t considered them at all may invite additional questions (especially if elections were missed or filings need to be amended).

None of this is to suggest credits should drive a founder’s core strategy. Product development, revenue growth and customer demand remain the priority. But when companies are already investing in innovation, hiring and infrastructure, it makes sense to evaluate whether part of that investment can be recovered.

The first step is simple: Get the full picture before making any decisions. In many cases, that includes working with an adviser who understands how credits apply to growing businesses.

Then, assign ownership. Determine who is responsible for reviewing credit opportunities throughout the year. Coordinate among departments like finance, HR and operations before major decisions are finalized. Make documentation part of the process rather than a reconstruction exercise at the end of the year.

Being proactive

Again, tax credits are not automatic. They’re for those who plan the entire year.

Startups looking to be more proactive should keep credits like the R&D in mind for its potentially meaningful offsets when investing in product or technical improvements. But don’t stop there.

If considering structured paid leave, review the Paid Family and Medical Leave Credit, which can apply when policies meet specific requirements. Businesses reviewing facility improvements may qualify for the Disabled Access Credit. While credits such as these don’t apply to every company, they’re common enough to demand attention before decisions are finalized — even seemingly unrelated ones.

Startups focused on capital efficiency will see this planning make a measurable difference over time.

Harrison Garba is a tax supervisor specializing in research and development tax credits at Burkland Associates. He holds a master of science in accounting from The University of Texas at Dallas and has experience across both public and private sectors. Garba has spent several years advising companies on R&D tax credits, helping startups and growth-stage businesses navigate complex tax regulations and maximize available incentives.