A new study has identified the states with the best tax incentives for small businesses in 2025, with Maryland placing first.
MRP software manufacturers MRPeasy analyzed incentive programs across all U.S. states to determine the state with the best tax incentives for small businesses, with incentives that involve grants, tax credits, and tax exemptions scoring highest due to their relevance.
The data reveals that Maryland ranks the highest regarding tax incentives for small businesses with 91 programs in total, with the main focus being on tax credit and grant schemes.
Here is a look at the Top 10
1. Maryland — Maryland ranks first in the nation for the best tax incentives for small businesses. Maryland also ranked highest for “particularly helpful” programs, with 70 of its 91 tax incentives classified as such. Among those programs are the Earned Income Tax Credit (EITC), the Senior Tax Credit, and several Clean Energy Tax Incentives that give substantial credits, grants, and rebates to small business owners.
2. Massachusetts — What makes Massachusetts unique is its wide array of programs, most of which are grants and loans. Many of these policies are tax incentives aimed at research and development, clean energy, and life sciences, allowing small businesses to make significant strides while motivating them financially.
3. Oklahoma — The Sooner State offers 81 unique programs in total, with the main focus being tax exemptions and rebates. Examples include the tax exemption for new or expanding businesses in Oklahoma and the Oklahoma Investment/New Jobs Tax Credit, making the state one of the most competitive in terms of business growth.
4. Connecticut — Driven by its comprehensive tax incentive programs, Connecticut boasts a range of tax credits and grant opportunities including the Angel Investor Tax Credit, and the Small Business Express Program, providing critical funding and support for startups and growing businesses.
5. Pennsylvania — The Keystone State boasts 78 tax incentive programs in total, one of which is the highly praised Keystone Opportunity Zone initiative, offering significant tax abatements to companies operating within certain areas in an effort to spur growth and development in such zones.
6. North Dakota — What sets ND apart is its loan participation programs and collateral support initiatives for small businesses. Programs like the small business loan guarantees from the Bank of North Dakota help drive entrepreneurship.
7. South Carolina — The Palmetto State ranks seventh thanks to its portfolio of refundable tax credit programs, such as the Job Development Credit, which incentivizes companies to create new jobs and defrays that cost for businesses investing in the local labor pool.
8. Kansas — Kansas scored above average mainly due to the solid tax credit and exemption programs available, such as the High Performance Incentive Program (HPIP), which is an incentive program for companies that invest in such things as major capital improvements, and the Promoting Employment Across Kansas (PEAK) program that helps finance job creation.
9. Washington — Washington is helped by its wide array of tax incentive programs, focused mainly on tax deductions and deferrals. Examples include tax incentives for manufacturers and processors for hire in the aerospace industry, reflecting Washington’s emphasis on growing high-tech and advanced industries.
10. Iowa — Iowa has several tax abatement and exemption programs such as the Targeted Jobs Withholding Tax Credit, that provide incentives for businesses to create jobs and develop infrastructure in certain cities, which contributes to making Iowa a very appealing state for small businesses.
Karl Heinrich Lauri, Managing Team Member at MRPeasy, commented on the study: “This study highlights the crucial role tax incentives play in fostering a thriving small business ecosystem across the United States.
“States like Maryland and Massachusetts demonstrate the importance of offering targeted programs, such as tax credits and grants, that directly address the needs of small business owners.
“By investing in these incentives, states not only encourage entrepreneurial growth but also strengthen local economies and create job opportunities. This helps to drive innovation and economic resilience.”