The R&D Tax Credit

Who & What Qualifies?

Contrary to popular myth, this credit is not limited to companies in the high-tech, biotech and pharmaceutical sectors. In recent years, there has been significant clarification to the R&D tax code which provides greater direction about what qualifies. Today, the R&D Tax Credit can apply to a variety of areas including manufacturing, engineering, software development, quality assurance, and information technology.

Does your company…

  • manufacture products?
  • develop new, improved or more reliable products/processes/formulas?
  • develop prototypes and models including computer generated models?
  • design tools, jigs, molds and dies?
  • develop or apply for patents?
  • perform certification testing?
  • conduct testing of new concepts and technology?
  • develop new technology?
  • attempt using new materials?
  • perform environmental testing?
  • add new equipment?
  • develop or improve production/manufacturing process?
  • develop software or hardware?
  • improve or build new manufacturing facilities?
  • automate/streamline internal processes?

OR

  • does your company hire outside consultants/contractors to do any of these activities?

r&d test

R&D Tax Credit Qualifying Costs:

  • Wages

  • Supplies

  • Contractor Research

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What you should know about the R&D Tax Credit

  • Every successful company is potentially eligible for this credit. Depending on the business, even your day-to-day operations qualify. It’s just a matter of having a total understanding of what is and isn’t allowed with this credit
  • Recent guidance by the federal government has clarified the R&D tax credit rules in a more favorable light, suggesting that more companies are eligible than previously thought.
  • Big business is getting 70% of all R&D tax credit dollars – that’s $5 billion in tax credits. Small and mid-size businesses deserve their fair share. After all, they represent over 90% of businesses in the US.
  • The tax credit is in addition to the tax deduction for R&D expenses. It is an actual dollar-for-dollar reduction against taxes currently owed and against taxes previously paid.
  • This credit is usually available for the prior three years in addition to the current year. However, a business can take the credit for any open tax year. Additional years may be available, if the business is in a net operating loss or alternative minimum tax position.
  • Federal tax credits can carry forward for twenty years.

When you qualify for the R&D Tax Credit

  • Your tax liability is reduced.
  • Your company’s cash flow will increase.
  • When generating credits for prior years, the IRS sends you back cash.
  • Your company’s overall effective tax rate may be lowered.

But don’t take our word for it, use our anonymous R&D Tax Credit Assessment Tool to determine whether or not you should explore the R&D Tax Credit and if there is an opportunity for your company to recover cash and reduce future tax liabilities.