Improving the innovation capability of small and medium-sized enterprises (SMEs) is the foundation of high-quality economic development in China. In recent years, government subsidies and tax incentives are important measures implemented by Chinese government to support the innovation and development of SMEs. This paper selects A-share SMEs and GEM companies from 2012 to 2021 as samples to empirically exame the impact of government subsidies and tax incentives on SMEs innovation, and test the optimal range of government subsidies by building a threshold effect model. The results show that both government subsidies and tax incentives can promote the innovation of SMEs. However, government subsidies are not the more the better, there is an optimal range, in which the combination of the two can play the greatest role.