New Tax Credits & Deductions MSPs Can Claim in 2026

Taxes are often treated as a once-a-year compliance chore for MSPs. Something you deal with after the year is over, when the numbers are mostly locked, and the only real question is how painful the bill will be. But under the 2026 tax landscape, that mindset leaves a lot of value on the table.

Between the One Big Beautiful Bill Act (OBBBA), any lingering TCJA-era rules, and a handful of permanent or expanded incentives that now extend into 2026 and beyond, tax planning has become much more of an operational decision. The credits and deductions available to MSPs today directly affect how much you can invest in people, systems, and growth without putting pressure on cash flow.

The OBBBA is a major driver of change, but it’s not the only one. Several long-standing tax incentives have been clarified, extended, expanded, or made permanent, while others are quietly sunsetting. For MSP owners, the opportunity in 2026 is understanding how to optimize the credits and deductions available to them. 

In this guide, we’ll walk through:

• New and expanded business tax credits MSPs can claim in 2026
• High-impact business tax deductions that support scaling
• How tax strategy connects to MSP operations, cash flow, and growth decisions

We’ll keep things high-level and practical, but if you need a deeper dive into any resources, they will be linked! 

The Effects of the OBBBA on MSP Businesses

The One Big Beautiful Bill Act reshaped the tax environment for MSPs in ways that go beyond a single credit or deduction. At a high level, the law did three things that matter most for service-based businesses:

1. It expanded access to certain credits and made others permanent, which reduces uncertainty and makes long-term planning possible again. Many MSPs avoided building multi-year tax strategies under TCJA-era rules because incentives were constantly set to expire.

2. It fixed deduction rules that disproportionately hurt service businesses. The most notable example is the restoration of immediate expensing for domestic research and experimental (R&E) costs, which had been amortized over five years from 2022–2024.

3. It clarified and stabilized how credits and deductions interact. Coordination rules still apply, but MSPs now have clearer guidance on how wages, depreciation, and credits fit together under 2026 laws.

This article won’t rehash the technical mechanics of the OBBBA in detail. If you want that level of depth, we cover it fully in our OBBBA pillar guide. 

Here, the goal is to show how the law changes what MSPs can actually claim in 2026 and how those incentives align with growth.

New Business Tax Credits MSPs Can Claim in 2026

Before diving into specific credits, it helps to reset expectations. A business tax credit reduces taxes owed dollar for dollar. It’s not the same as a deduction, which only reduces taxable income. Credits tend to be more valuable, but they’re also more tightly regulated and easier to miss.

OBBBA-Related Tax Credits for MSPs

R&D Tax Credit

‍The R&D tax credit remains one of the most valuable and misunderstood incentives available to MSPs. Despite the name, it applies to service businesses that develop or improve internal software, processes, automation, or systems through technical experimentation.

For MSPs, typically qualifying activities often include:

• Building or improving internal tools and scripts
• Customizing PSA or RMM platforms beyond basic configuration
• Developing automation for onboarding, monitoring, billing, or reporting
• Creating security, compliance, or service delivery workflows

The OBBBA didn’t radically change how the credit is calculated, but it made it far easier to use. With the immediate expensing of R&D costs restored and the credit made permanent, MSPs can now align the credit with real-time investment instead of waiting years for a benefit. If you want to learn more about the R&D Credit, read more here. 

Payroll-Related Credits Affected by the OBBBA

‍The OBBBA didn’t create new payroll tax credits for MSPs, but it clarified how existing credits interact with wages, payroll taxes, and owner compensation under 2026 rules. For payroll-heavy MSPs, this coordination matters because many credits, especially the R&D tax credit, are tied directly to employee wages.

Because of the R&D credit, small MSPs may also apply up to $500,000 per year of the credit against payroll taxes, which can massively improve cash flow during growth phases. But this can only happen if wages are properly allocated and not double-counted with other wage-based deductions or benefits. As MSPs scale headcount or adjust owner W-2 compensation, payroll decisions can quietly affect credit eligibility or value. Credits don’t stack endlessly on the same wages, so planning is essential to avoid unintentionally reducing or disqualifying a credit that would otherwise be available.

Credit Carry-forward Considerations

‍When a business tax credit can’t be fully used in the year it’s generated, it can generally be carried forward to future years. While this provides flexibility, MSPs should treat carry-forwards as a planning decision, not a default outcome.

An MSP that consistently generates credits but has limited tax liability may benefit from prioritizing payroll tax offsets or timing credit usage to align with expected profitability. Conversely, a growing MSP may intentionally carry credits forward to offset future tax bills. Under the 2026 rules, the goal isn’t just to accumulate credits, it’s to use them in a way that supports the MSP’s growth timeline and cash needs.

Other Business Tax Credits Available to MSPs in 2026

Not all valuable credits are tied directly to the OBBBA. Several long-standing incentives remain relevant for MSPs depending on size, structure, and growth plans.

Employer-Provided Childcare Credit (Expanded)‍

MSPs that provide or subsidize childcare benefits for employees may qualify for an expanded employer-provided childcare credit. As competition for technical talent increases, benefits like this can support hiring while offering a tax offset.

Paid Family and Medical Leave Credit (Now Permanent)

‍Previously temporary, the Paid Family and Medical Leave Credit is now permanent. MSPs that voluntarily offer qualifying paid leave programs may be eligible for a credit based on wages paid during leave.

New Markets Tax Credit (Permanent)

‍While more situational, MSPs operating in or investing in qualifying low-income communities may benefit from the now-permanent New Markets Tax Credit. This is less common for traditional MSPs, but it can apply in specific expansion or acquisition scenarios.

Credits Being Phased Out or Restricted

While many incentives expanded under the OBBBA, others are winding down. Timing matters if your MSP plans capital investments tied to these credits.

Notable phase-outs include:

• Commercial Clean Vehicle Credit (Section 45W): Eliminated for vehicles placed in service after September 30, 2025
• Alternative Fuel Vehicle Refueling Property Credit (Section 30C): Ends for property placed in service after June 30, 2026
• Energy-Efficient Home and Commercial Building Credits: Many residential and commercial energy credits phase out after 2025–2026

If your MSP has been considering vehicles, facilities upgrades, or energy-related investments, these deadlines may influence timing decisions.

Business Tax Deductions MSPs Should Prioritize in 2026

As mentioned before, tax deduction reduces taxable income while tax credit reduces taxes owed.

Both matter, but deductions tend to support scale by lowering the tax cost of reinvestment. With that in mind, these are the deductions to consider as new or changed because of the Big Beautiful Bill and other laws recently passed.

New or Updated Business Tax Deductions Under 2026 Laws

‍Qualified Business Income (QBI) Deduction

The QBI deduction, which allows eligible pass-through business owners to deduct up to 20% of qualified income, is now extended through 2029. For MSPs classified as specified service trades or businesses (SSTBs), eligibility still depends on income thresholds, but permanence makes long-term planning possible again.

Full Expensing of Research & Experimental (R&E) Costs

‍Restored under the OBBBA, MSPs can once again deduct qualifying R&E costs in the year incurred rather than amortizing them over five years. For service businesses investing heavily in people and systems, this is one of the most impactful changes under 2026 tax laws. R&D/R&E tax deductions are different from the credit mentioned above. To understand, feel free to read our blog on the subject here.

Expanded Section 179 Deduction Limits

Section 179 allows immediate expensing of qualifying equipment and software. Higher limits mean MSPs can deduct more of their technology investments upfront instead of depreciating them over time.

Bonus Depreciation at 100%

‍Bonus depreciation returns to 100%, allowing immediate expensing of qualifying assets. This pairs closely with MSP investments in servers, networking equipment, and infrastructure. Though Section 179 and 100% Bonus Depreciation essentially do the same thing, it’s important to learn both in depth to discover which is best for your MSP. And since bonus depreciation is done automatically, it is especially important to elect items for Section 179 strategically. 

‍Business Interest Expense Deduction (More Favorable Calculation)

‍The calculation for deductible business interest expense becomes more favorable under 2026 rules, particularly for businesses that borrow to invest in growth.

‍Corporate Charitable Contribution Floor

For MSPs structured as corporations, updated charitable contribution rules may affect how much is deductible and when.

Business Owner Tax Deductions for MSPs

Beyond deductions taken at the business level, MSP owners should also pay close attention to deductions tied to how they compensate themselves and structure personal benefits. These owner-level deductions often get overlooked, but they can materially affect overall tax liability, especially as MSPs become more profitable. Below are important alternative deductions to consider:

• Owner wages and benefits are one of the most important areas to review. For owners of S corporations, reasonable W-2 wages are required, and those wages may support certain deductions while also affecting eligibility for other benefits like the QBI deduction. In addition, employer-paid benefits such as health insurance or certain fringe benefits can often be deducted by the business while providing tax-efficient compensation to the owner.
• Retirement contributions are another powerful planning tool. Contributions to SEP IRAs, Solo 401(k)s, or other qualified retirement plans can reduce taxable income while helping owners build long-term savings. The optimal plan often depends on the MSP’s profitability, payroll structure, and whether the owner wants flexibility or higher contribution limits.
• Health insurance and HSA-related deductions can also play a meaningful role. Depending on entity structure, owners may be able to deduct health insurance premiums or make pre-tax contributions to Health Savings Accounts, lowering both current tax liability and out-of-pocket healthcare costs.
• Finally, owner-paid business expenses deserve regular review. Expenses such as home office costs, business travel, education, and professional fees may be deductible if they are ordinary, necessary, and properly documented. As MSPs scale, it’s easy for these expenses to blur between personal and business use, so clear documentation is critical.

On the personal side, the standard deduction has increased, which may affect whether itemizing still makes sense for some owners.

How Tax Credits and Deductions Support MSP Business Operations and Growth

For MSPs, tax credits and deductions actively shape what the business can afford to do next. The ability to claim incentives like the R&D tax credit, immediate expensing of R&E costs, or payroll-related deductions directly affects whether an MSP can hire ahead of revenue, invest in automation, or modernize internal systems without straining cash flow. 

For example, an MSP that knows it can offset part of its engineering payroll through R&D credits may feel more comfortable building internal tooling or improving service workflows instead of relying on manual processes that don’t scale.

These incentives also lower the true, after-tax cost of growth. Hiring a new engineer, investing in a PSA customization, or rolling out automation might look expensive on paper, but the net cost changes once credits and deductions are factored in. Over time, that difference compounds, allowing MSPs to reinvest more aggressively in people and technology while maintaining healthier margins.

The catch is that these benefits only work when they’re supported by accurate tracking. As MSPs scale, clean expense categorization, reliable payroll records, and clear documentation become essential. Without that foundation, even eligible incentives can become difficult to claim or defend. When tracking is done well, tax incentives reinforce operational decisions. When it isn’t, they become another missed opportunity discovered too late.

How MSPs Can Prepare to Claim Tax Credits and Deductions in 2026

For MSPs, preparation now matters far more than last-minute optimization later. Most missed tax credits and deductions aren’t lost because the business was ineligible, they’re lost because eligibility wasn’t evaluated until filing season, when revenue, payroll, and spending decisions are already locked. As MSPs grow, small changes in revenue, entity structure, or compensation can quietly push a business into or out of eligibility for key incentives like the R&D credit or the QBI deduction. That’s why eligibility should be reviewed annually, not retroactively.

Clear, consistent expense tracking is equally critical. Many 2026 tax incentives hinge on how costs are categorized, when they’re incurred, and how closely they can be tied to business activities. An MSP that tracks automation work, software development, or internal tooling loosely may technically qualify for credits or deductions, but lacks the documentation to defend them. In practice, this often shows up when a growing MSP spends heavily on engineers or systems during the year, only to discover at tax time that the work wasn’t documented in a way that supports a credit or immediate deduction.

Working with tax professionals who understand MSP business models also becomes non-negotiable at this stage. MSPs don’t look like traditional service firms or product companies, and generic tax advice often misses how recurring revenue, contractor usage, and internal system development interact with the tax code. Finally, tax planning has to be aligned with growth goals, not just short-term tax minimization. Decisions about hiring, compensation, technology investment, or depreciation can either preserve valuable credits and deductions or accidentally eliminate them. When tax planning happens alongside operational planning, incentives reinforce growth. When it’s deferred until filing season, it usually turns into damage control instead.

Necessary disclaimer: we are not licensed accounting or tax professionals. Please consult yours before filing your taxes. Looking for an accountant? Here’s our guide and list of recommendations.  

What 2026 Tax Credits and Deductions Mean for MSP Growth

The 2026 tax landscape gives MSPs more control than they’ve had in years, but that control only matters if it’s used deliberately. Between new and expanded business tax credits, restored and permanent deductions, and clearer coordination rules under the OBBBA, MSPs now have a wider set of tools to support growth without taking on unnecessary tax risk. The opportunity isn’t just in what’s available, it’s in knowing how those incentives fit together as your business scales.

The biggest shift for MSP owners is recognizing that tax strategy is no longer separate from business strategy. Credits and deductions directly influence the real cost of hiring, the timing of technology investments, and the ability to reinvest in systems and process improvements that drive long-term efficiency. When tax planning happens alongside operational planning, incentives reinforce growth instead of reacting to it after the fact. This is a big reason why we held a webinar explaining all the strategies MSPs could use in light of the new Trump tax law to optimize their tax season. Watch that here. 

To help MSPs turn these rules into practical decisions, we also created a 2026 tax prep checklist so you don’t miss any deduction or credit relevant to your business.

The earlier tax planning is integrated into how your MSP operates, the more value these credits and deductions can create, not just at filing time, but throughout the year as the business grows.

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