This study examined the effect of tax incentives on financial performance of Small and Medium Enterprises in Nigeria. The study adopted a longitudinal research design with the use of the data obtained from the statistical bulletin of the Central Bank of Nigeria (CBN). The population of this study is all Small and Medium Enterprises in Nigeria with a representative sample size of 41.5million. This study will use secondary data. The data was obtained from the statistical bulletin of the Central Bank of Nigeria and reports of the Federal Inland Revenue Service (FIRS) for the period between 1985 and 2020 for analysis. The study will use the ordinary least square (OLS) regression technique of analysis using time series data. The findings revealed that Capital Allowance Incentives and Pioneer Status Incentives have positive and significant effects on the financial performance of SMEs in Nigeria. The study, therefore, concluded that the financial performance of small and medium enterprises in Nigeria is driven by Valued Added Tax, Customs and Excise Duties, and Other various taxes by state. In view of the foregoing, the study recommended that Government should create incentives as an encouragement to reduce tax evasion actions by small and medium enterprises (SMEs) and other incentives like Pioneer Status, Reduced company income tax, Loss Relief, etc., should be increased in other to encourage investors and enhance the growth of SMEs in the national economic growth.